This is a financial promotion for The First Sentier Asia Pacific ex-Japan Strategy. This information is for professional clients only in the EEA and elsewhere where lawful. Investing involves certain risks including:
- The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.
- Currency risk: the Fund invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the Fund and could create losses. Currency control decisions made by governments could affect the value of the Fund's investments and could cause the Fund to defer or suspend redemptions of its shares.
- Single country / specific region risk: investing in a single country or specific region may be riskier than investing in a number of different countries or regions. Investing in a larger number of countries or regions helps spread risk.
- Charges to capital risk: The fees and expenses may be charged against the capital property. Deducting expenses from capital reduces the potential for capital growth.
- Emerging market risk: Emerging markets tend to be more sensitive to economic and political conditions than developed markets. Other factors include greater liquidity risk, restrictions on investment or transfer of assets, failed/delayed settlement and difficulties valuing securities. .
- Smaller companies risk: Investments in smaller companies may be riskier and more difficult to buy and sell than investments in larger companies.
For details of the firms issuing this information and any funds referred to, please see Terms and Conditions and Important Information.
For a full description of the terms of investment and the risks please see the Prospectus and Key Investor Information Document for each Fund.
If you are in any doubt as to the suitability of our funds for your investment needs, please seek investment advice.
Back to the future, again?
“The future is as full of promise as it is fraught with uncertainty.”
Lee Kuan Yew, former Singapore Prime Minister.1
At the turn of the century, Lee Kuan Yew made this remark about the challenges Singapore was facing in terms of the forthcoming knowledge, as opposed to the existing industrial, economy. He could have easily been talking about emerging markets broadly, or indeed reflecting on the human condition in general.
These days all of us, market participants or not, seem almost entirely focused on uncertainty rather than promise. Perhaps it is social media connecting everybody, which has ironically made societies and people ever more anxious, extreme and unhappy? Such matters are beyond the scope of this commentary, but markets are a social construct, so perhaps they are not without relevance.
Emerging markets, as a concept marketed to investors, have always been about promise. But, latterly they seem to more resemble Samuel Johnson’s quip about second marriages, as “a triumph of hope over experience.”2
Charles de Gaulle made much the same point in the 1960s, when he observed, “Brazil is the country of the future and always will be.”3 While this pertains to one of the BRICs4 (more marketing-speak), it could well apply to the entire emerging-markets asset class these days.
So, what gives; as markets continue to chew up money and spit out nothing but disappointment? Well, whisper it softly, but it has already been a lost decade. Hence returns (including our own), in an absolute sense, have been quite mediocre. You could say that risk-free rates have been zero, with inflation quiescent, but that is no longer true and emerging markets carry their own particular risks… as we are finding out all over again.
Give me anything, as long as it’s technology
You would have to go back further, to the prior decade (2003-13), when Asia was rebounding from the 1997 Asian crisis, to find returns that made it worth all the trouble. India has continued to deliver high absolute returns throughout (though lower in the last decade), while sector-wise, technology has been the answer to everything. In markets, just as in life, we are all wedded to our new toys. In the last decade, the technology sector has compounded at circa 15% per annum.
Everything else, by comparison, looks like it has been a waste of effort. Country-wise, Taiwan has thrived and globally the US looks increasingly like the only game in town. You can make a case for a global allocation, but that is over half America (which has been largely driven by the “Magnificent Seven”5 companies) these days.
Back in Asia, a few countries like China have managed to compound at low single-digit levels, but some countries’ returns, including the Philippines and Malaysia, have actually been negative in US dollar terms.