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In the second article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, discusses the importance of keeping a long-term mindset and valuation discipline as the strategy celebrates its 30th anniversary this year.

In the final article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, discusses the importance of keeping a long-term mindset and valuation discipline as the strategy celebrates its 30th anniversary this year.

When China reopened at the end of 2022, domestic stocks had a V-shaped rebound, analysts raised their earnings forecasts, and companies prepared for a steep recovery in the economy. But the market’s optimism soon faded and turned into disappointment.

Sree Agarwal and Shivika Srimal, investment analysts at FSSA Investment Managers, believe there are a number of reasons to be positive on India in the long run, and shared their rationale at the FSSA Forum 2023.

In our team, mistakes are teachable moments to be shared and learnt from. Thankfully, for us and our clients, in our history of investing in India we have managed to avoid the big ones.

One of the true competitive advantages we believe we have at FSSA is a genuine long-term investment horizon. For us, investing is not about trying to predict which stocks will rise or fall next month or quarter; rather, it is a non-speculative activity aimed at participating in the long-term value creation we believe the best companies can generate.

In the past 12 months, global investors have worried about a “regime change” in the long-term inflation outlook, as well as the heavy rotation away from technology companies after the Covid optimism reversed.

India's economic prowess has become a focal point for institutional investors eyeing long-term growth. Traditionally, investors lean towards Global Emerging Market (GEM) strategies to tap into this opportunity.

India - Monthly Manager Views - June 2021

2021 will be a year of recovery. This is not surprising given last year’s economic downturn. If vaccines are being rolled out gradually during the year, we believe the economy will recover, especially those sectors that have been hit hard like travel.

Given its size and influence, China remains a key investment destination despite ongoing trade disputes and diplomatic tensions with the US and Australia. With a GDP equivalent to around 70% of the United States, many global portfolios continue to feature Chinese equities.

While the pandemic is still far from over, a number of key leading indicators point to a healthy and broad-based recovery in China. Industrial production, trade activity and retail sales have been strong; and in stark contrast to the lockdowns and travel restrictions in early 2020, domestic travel, tourism and the leisure sectors in China have sprung back to life.

Albert Einstein famously said, “Not everything that can be counted counts and not everything that counts can be counted.” This holds true in many situations, but we think it is especially true when it comes to risk management.

In our last client update, written through the depths of Covid-despair, we observed that real life and the world of markets are seldom so intimately entwined.

Asia Pacific webcast: Positioning for Reflation

Video : Asia Pacific Equities Strategy Client Update

Though Covid hasn’t yet finished with us, the markets have finished with Covid. In real life, there is still plenty of misery to go around, but things have seldom been better for investors. Optimism has served us well, as the money printing presses have rolled to counter the “unprecedented” threat.

Land, Labour, Capital and Entrepreneurship. These are the well-known “Factors of Production” as defined by classical economists. The Entrepreneur (or Company) is the one that combines these factors to earn a profit.

Every company we speak to these days tells us about the cost pressure that they are facing, emanating from rising global commodity prices. Domestic steel prices have risen by 35% y/y, copper by over 50% y/y and palm oil by over 60% y/y through February 2021.

FSSA India webcast focus on the India Subcontinent Markets and Asia Pacific equities

50x P/E!1 70x P/E! 100x P/E! Valuations that were outrageous just a few years ago are commonly bandied about by most of the investment community these days. But, ask any respected business owner and they would shake their head in disbelief.

Martin Lau, Managing Partner FSSA Investment Managers, heads up the FSSA China strategies and looks back on 2021 in the video below.

China made headlines for watering down coal reduction targets during COP261, but we think the criticism is unfair.

In this China update for mid-2022, we discuss some recent topics of interest as highlighted by our clients.

What are your thoughts on the increasing regulation risk of investing in China? Firstly, regulations are nothing new — it has always been a part of the investment equation.

While the pandemic is still far from over, a number of key leading indicators point to a healthy and broad-based recovery in China.

After Chinese stocks rallied upon the abrupt end to pandemic lockdowns in late 2022, pessimism has taken hold of the markets again. This time, concerns include the uneven post-Covid recovery, the lack of stimulus and weak external demand.

While the media has been replete with negative headlines on China, Winston Ke and Helen Chen present a more balanced view. China still has many attractive features, including a large universe of quality companies with capable leaders, consistent earnings growth and increasing innovation.

Most people in North America and Europe hold a negative view of China, according to a recent survey. This is hardly surprising given the portrayals in Western media.

In this podcast sponsored by Morningstar, our Managing Partner, Martin Lau, reflects on the state of China’s economy and market and what the future might hold.

Alistair Thompson, Director at FSSA Investment Managers, heads up the FSSA Asia Pacific strategies and looks back on 2021 in the video below.

With over 20 years managing money in China I have seen significant changes both in the corporate and investment environment. One of the biggest shifts that has occurred is the fact that China is not short of investment capital.

Looking back (though it’s not like we didn’t already know), it is clear that we have been living in an increasingly distorted world. Financially, for the last decade, it has been about interest rates falling to (and staying at) zero in a world of general money printing.

Lee Kuan Yew, although somewhat a polarising figure, perhaps understood state power and the human condition better than anybody. Consequently, Singapore has often been criticised as much as it has been greatly admired. Irrespectively and without question though, the country has gone from strength to strength.

Our investment philosophy is to back owners and managers with whom we feel strongly aligned. These owners typically have track records of treating all stakeholders fairly, in both good and bad times.

We have written about the spate of Initial Public Offerings (IPOs) in India and our reasons for staying away from them, for the most part. This time, we want to talk about why new listings are important to keep the market vibrant and to keep the entrepreneurial spirit in the country alive.

As with global automotive manufacturers, several Indian automotive original equipment manufacturers (OEMs) have recently announced that the shortage of semiconductor supply has impacted their production schedules.

We had entered the meeting with a leading air-conditioner company in our portfolio worried about the risks to its growth and profitability, as the second wave of Covid-19 affected consumer demand and raw material costs rose sharply.

Over the last few years, we have been selling many companies which have become expensive. On the other hand, there are still companies that are attractively valued with robust growth ahead.

Last year, we wrote about the bubble we were witnessing in the initial public offerings (IPOs) in India. Now, we see a different type of bubble forming – in these cases, the business is often a proven one, with a strong track record and high return profiles.

As the saying goes, those who stand for nothing, fall for everything. And so it is that we believe there isn’t a price for every business. Most are better left alone in the interests of sleeping better at night. Staying disciplined to our process means erring on the side of caution and avoiding companies where we have lingering suspicions about the governance practices.

That would perhaps be an accurate description of what drove some of my portfolio decisions as a young fund manager, roughly 15 years ago during the global financial crisis (GFC) meltdown.

FSSA India webcast focus on the India Subcontinent Markets and Asia Pacific equities

Land, Labour, Capital and Entrepreneurship. These are the well-known “Factors of Production” as defined by classical economists. The Entrepreneur (or Company) is the one that combines these factors to earn a profit.

After a recent meeting in Mumbai with the top management of Mahindra & Mahindra we came back with a clear message – M&M’s commitment to its purpose does not mean that it will continue to operate loss-making businesses.

Mutations, it would seem, are not unique to the virus. Starting with some housekeeping, we always end our letters seeking feedback from our regular readers.