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Speaker 1: to Marin Talks Money, the podcast in which people who
Speaker 1: know the markets explain the markets. I am Maren Somerset Web.
Speaker 1: This week I am speaking with Fion Yang, portfolio manager
Speaker 1: on the Invesco Asia Dragon. Fiera specializes in Asian equities
Speaker 1: and she is the perfect person to help us all
Speaker 1: understand where Asia fits into our portfolios this year. Fiona,
Speaker 1: Welcome to Marin Talks Money. Hello Marion, thank you for
Speaker 1: having me on a show. Well, it's going to be good. Now. Listen,
Speaker 1: your space is absolutely huge. You're covering pretty much all
Speaker 1: of Asia bar Japan, right, all of that counts is
Speaker 1: emerging Asia. So you're covering this vast area which international
Speaker 1: investors were not paying nearly enough attention to until relatively recently.
Speaker 1: So until even you know, a year ago, it was
Speaker 1: all America, America, America, American exceptionalism. And now we've begun
Speaker 1: to see this rotation out of the US and into
Speaker 1: every other interesting market there is, which is quite a
Speaker 1: lot of the ones that you cover, and your your
Speaker 1: trust had excellent performance last year partially as a result.
Speaker 1: Now these markets aren't looking quite as cheap as they were, right,
Speaker 1: but maybe you could just talk us through the way
Speaker 1: that rotation is working for your market. Yeah.
Speaker 2: I think twenty twenty five was a year of rebalancing,
Speaker 2: I would like to call it because of external factors
Speaker 2: like the weak US dollar, as well as domestic adding
Speaker 2: like the central banking Asia basically cutting into straight to
Speaker 2: try to stumulate economic growth that just perpected a lot
Speaker 2: of tension combined with Asia, just Taiwan and Career being
Speaker 2: the engine behind the global ai revolution. I do think
Speaker 2: Ernie's growth, combined with evaluation rating has really driven the
Speaker 2: Asia market to outperform a lot of the other developed market.
Speaker 2: And we're heading into twenty twenty six, a lot of
Speaker 2: investors are thinking about rebalancing their global portfolio. Increasingly they
Speaker 2: want to racify further into Asia. Animal Asia.
Speaker 1: It's not just age obviously, it's musing markets around the world.
Speaker 1: But for purposers of this podcast, where we're sticking with
Speaker 1: the Asia. But again, we've already made this mistake almost
Speaker 1: before we be and started by referring to Asia as
Speaker 1: one big homogeneous mass, which of course it isn't. And
Speaker 1: a lot of people when they think about the Asian
Speaker 1: markets or the emerging Asian markets, they will think about
Speaker 1: China and they'll forget about all the other markets. So
Speaker 1: these are all very different, right, We have to look
Speaker 1: at them as very separate countries in separate markets.
Speaker 2: Yeah. Absolutely, I think one of the biggest misconceptions about
Speaker 2: Asia is this is China and the rest. But reality,
Speaker 2: as you pointed out, there are so many different countries
Speaker 2: there for a different sectors within Asia. Look at India,
Speaker 2: It's a country that can generate ten percent nominal GDP growth,
Speaker 2: you can't really find very rare to finding the developed market.
Speaker 2: And then you look at the East Asia block, there
Speaker 2: are just so many countries that benefit from the diversification
Speaker 2: of manufacturing hut away from China or more of a
Speaker 2: China plus one strategy. And then the tech sector is
Speaker 2: Asia is not just emerging technology, it's more like the
Speaker 2: uncompested leaders a lot of the global act sector in
Speaker 2: memory foundry and or all of this just make Asia
Speaker 2: extremely exciting place to invest.
Speaker 1: Okay, well, why don't we start I tell you what
Speaker 1: before we move on to looking at what's referred to
Speaker 1: as the emerging economies in China, although sort of slightly
Speaker 1: ridiculously the very idea that South Korea could be considered
Speaker 1: emerging at this point as ridiculous, of course, but Japan
Speaker 1: is not included in that. So let's briefly, if you
Speaker 1: don't mind, talk about is there any spillover effect from
Speaker 1: the election in Japan? So we have this supermajority now
Speaker 1: for Takeichi, and that means that she will be able
Speaker 1: to drive forward all her priorities inside Japan. And I
Speaker 1: know that one of the worries there if there are
Speaker 1: that many worries around it, but there're worries to do
Speaker 1: with with Japan's fiscal position, and there of course worries
Speaker 1: to do with any ratcheting up of tension in the
Speaker 1: whole region as a result of defense spending and talking
Speaker 1: about China and in Japan. Is there anything in that
Speaker 1: that might spill over to change the conversation that we're
Speaker 1: about to have.
Speaker 2: I think though in the China and Japan relationship is
Speaker 2: always being a bit tricky. So I've actually in Japan
Speaker 2: for holiday earlier this year. One of the main things
Speaker 2: happening is Chinese tool groups are not flying into Japan
Speaker 2: and more. That's definitely a big head to the Japanese
Speaker 2: tourism industry. But then at the flip side, it's just
Speaker 2: they might have found the Australians or the other nationals
Speaker 2: want to go to Japan because of course exactly, I
Speaker 2: think the vacancy at a skiing resort I go to
Speaker 2: pretty much get filed immediately when they release those vacancies,
Speaker 2: so there could be a bit of a transition period,
Speaker 2: but I think the impact is manageable. And in terms
Speaker 2: of you know, the competitive dynamics. What happened to the
Speaker 2: NISI en Lusus security one is something that I probably
Speaker 2: monitored more because for my portfolio, we do have significant
Speaker 2: exposure to the Korean ex borders and the current sy
Speaker 2: always play a part in terms of the pricing competitive nurse.
Speaker 1: So the current portfolio, I guess this.
Speaker 2: Concentrated a lot in the Korean memory space. I do
Speaker 2: you think Japan at this point doesn't really have this
Speaker 2: strong consentder as compared to the Korean memory producers. So
Speaker 2: I feel relatively comfortable with that ex culture in Korea.
Speaker 1: Okay, that's the first elephant in the room for this area,
Speaker 1: and the second is demographics. So I just wanted to
Speaker 1: get that talk about that a little before we move
Speaker 1: on in that. Historically, say twenty years ago, even ten
Speaker 1: years ago, when a room was looking at the investment
Speaker 1: opportunities across Asia, one of the things would be said
Speaker 1: would be growing populations, growing middle class populations, a rising prosperity,
Speaker 1: et cetera. And then that began to be people going, oh,
Speaker 1: I don't know, maybe China is going to get old
Speaker 1: before it gets rich. And then we've had this much
Speaker 1: faster than anyone ever expected fall off in fertility rates
Speaker 1: and I'm sure we both saw those numbers in China
Speaker 1: showing fewer than eight million berths in China last year,
Speaker 1: which was a bit of a shock to the system,
Speaker 1: even for people who'd been very worried about demographics. And
Speaker 1: we have Taiwan, Korea, all these countries have written up
Speaker 1: every low fertility rate and even places like you know, Vietnam,
Speaker 1: et cetera, where we thought fertility would remain higher for longer,
Speaker 1: falling below replacement rate. Does that sort of massive macro
Speaker 1: first change anything about the way you see the region.
Speaker 2: Yeah, the great question and a very long term question.
Speaker 2: And I do of the sitting here in Singapore. No,
Speaker 2: it's one of the places I have one of the
Speaker 2: lowest bust rate in the region, and in China as well.
Speaker 2: Looking at my peer groups, the incentives the government has
Speaker 2: introduced for them to have two babies or even three
Speaker 2: kid is just not enough to incentivise to have more.
Speaker 2: So this structural trend is undeniable. I think that's why
Speaker 2: a lot of the countries are trying to evolve their policies.
Speaker 2: Instead of you know, labor focused manufacturing, they're trying to
Speaker 2: move up the value added tay. They try to do
Speaker 2: more electronics using more or of robotics as well as
Speaker 2: the automation try to move away from the label sector
Speaker 2: to two different drivers. Why the structural challenge remains and
Speaker 2: we need to be selected in terms of the sector
Speaker 2: we might want to have expoke to. And then there
Speaker 2: is the added sort of silver investment theme that increasingly
Speaker 2: you start to see companies that are just attragging to
Speaker 2: the need of the retire read because instead of trying
Speaker 2: to pay their to the kids, now everyone is trying
Speaker 2: to say the hospitality industry as well as even retire
Speaker 2: re education, re education industry, all of this are gaining
Speaker 2: more affections in Asia. I think the good thing is,
Speaker 2: again it's a diverse region with many countries, and there's
Speaker 2: just every single country had the different stage of their
Speaker 2: aiding population. Career could be the first one and China
Speaker 2: follow food for Asia Fund manager myself, then there are
Speaker 2: just different sort of tracks you can tech to and
Speaker 2: imply what could happen to some of the other countries
Speaker 2: when they enter the aiding demographic a bit later on.
Speaker 1: Anyway, that's probably a bigger and different conversation. Maybe we'll
Speaker 1: pick that one up another time, but let's go on
Speaker 1: to why don't we talk about how you invest. When
Speaker 1: I look at what you do and what your trust does,
Speaker 1: it's very kid. This is a valuation driven and valuation
Speaker 1: focused method of investing across this insanely big region. So
Speaker 1: tell us a little bit about how you do that.
Speaker 2: Yeah, very happy to chat about that or something that
Speaker 2: I do every single day. So I would say we
Speaker 2: probably differentiate by three key points. The first one is,
Speaker 2: as you correctly point out, is valuation discipline. It's just
Speaker 2: we try to find unvalued miss priced opportunities. Everything basically
Speaker 2: has a fair value and we try to buy it
Speaker 2: at a point. As you know, market is few full,
Speaker 2: which are the buyer when the stock price is significantly
Speaker 2: below the fair value assessment that we have is estefinished
Speaker 2: for the company itself. And the second point is we try.
Speaker 1: To be long term. I think a lot of times.
Speaker 2: Too much actively itself is non desirable. The market extremely volatile.
Speaker 2: I think a frequent activity will not really help a
Speaker 2: lot of investors.
Speaker 1: So what we do.
Speaker 2: The typical holding period is around three to five years.
Speaker 2: We just want to be patient with our investment case,
Speaker 2: try to grow together with the portfolio company. And this
Speaker 2: so called evaluation GAT really need to give them time
Speaker 2: to close. If you look at our portful companies, a
Speaker 2: lot of them we have been holding them for more
Speaker 2: than a decade. Then that Eve is a good example.
Speaker 2: Is a gaming company in China, we have holded more
Speaker 2: more than a decade. If you hold on to the
Speaker 2: stock over the past ten years is pretty much has
Speaker 2: gone through a lot of volatility or in the market
Speaker 2: in terms of regulations as well as surprise. But marketcab
Speaker 2: has grown over six times. But that just shows that
Speaker 2: the power of stay in the seat, understanding the stock
Speaker 2: level drivers behind a single company. And last but not Lesia,
Speaker 2: we are comparing vests. This follows a more classic capital
Speaker 2: cycle if we try to find areas of the market
Speaker 2: that the other investors might not like. If a sector
Speaker 2: or company is staffed of capital, staft of investment, that's
Speaker 2: exactly when the remaining winners of the sector could enjoy
Speaker 2: higher return as well as having the price and power
Speaker 2: over that customers. So those are the three t pulars
Speaker 2: I would say about how we Asia and generally are
Speaker 2: for our investors.
Speaker 1: Okay, and in the region with thousands and thousands of
Speaker 1: listed companies, how do you narrow your universe down to
Speaker 1: even begin to analyze those companies. I think, in contrary Wetter,
Speaker 1: a lot of times we would try to identify opportunity
Speaker 1: in the sectors in the countries that other people might
Speaker 1: say not investable. I think a good example to look
Speaker 1: at is China, probably twenty four months ago, but most
Speaker 1: glowing investors were shown away from that market.
Speaker 2: But we are actually seeing world leading companies being thrown
Speaker 2: out of the bath water trading at extremely cheap multiples. Yes,
Speaker 2: there are macro conferms, but it doesn't really impact the
Speaker 2: fundamental of the company that we invest in. They still
Speaker 2: gain market share, they still try to improve their margin.
Speaker 2: A good example that we have picked up over the
Speaker 2: path few years h World. It's one of the leading
Speaker 2: hotel chain operator in China, so a bit like HILT
Speaker 2: them and what they did in China was extremely good.
Speaker 2: Throughout the extended COVID lockdown. They tried to gain more
Speaker 2: market share as well as improved their operating efficiency. So
Speaker 2: they come out of the whole CHRISTI being much lainer,
Speaker 2: operation much higher margie. So we are very happy with
Speaker 2: the operational performance of the company, but with what's going
Speaker 2: on with the macro noises. HROs training out an extreme
Speaker 2: discount as compared to the global gears. Okay, interesting, and
Speaker 2: what about dividends and income? And I see the trust
Speaker 2: has a reasonably high dividend yield three and a half.
Speaker 2: How important to that is that to you when you
Speaker 2: are stop picking? Yeah, so I think that's another common
Speaker 2: misconception maybe of some of the investors of Asia. The
Speaker 2: might think Asia is more growthy less dividend. We have
Speaker 2: really seen a partigm shift in that over the past
Speaker 2: five years. Korea is a good example. We've discussed briefly earlier.
Speaker 2: The value our initiatives is really trying to drive the
Speaker 2: Korean corporate to increase their shareholder return in the form
Speaker 2: of dividend as well as buyback, so that has their
Speaker 2: significant improved that markets dividend yield. And then if you
Speaker 2: look across Asia, similar stories could be found in Singapore
Speaker 2: as well as even the Chinese state owned enterprises. They
Speaker 2: have all driven up their shareholder return over the past
Speaker 2: few years. The Asia as a region, we can get
Speaker 2: a dividend yield about two percent on the bus and
Speaker 2: then for the trust, we actually have a bonus scheme
Speaker 2: in the sense that we pay out four percent of
Speaker 2: the need to our trust holders, so that give it
Speaker 2: a bit more gig on top of the regional index field.
Speaker 1: Okay, so this is using this ability that is peculiar
Speaker 1: to the investment trust industry, where you can pay out
Speaker 1: part of the capital as income and a lot of trust.
Speaker 1: Now do this paying out four percent a year to
Speaker 1: give investors maybe aimed particularly at older investors, to make
Speaker 1: sure they get a regular income every year, regardless of
Speaker 1: the actual income level of the trust exactly.
Speaker 2: And the majority of that dividend is funded by the
Speaker 2: trust dividend received from world Fuller company, but the additional
Speaker 2: come from the capitol.
Speaker 1: Why don't we have a look at some of your
Speaker 1: biggest markets individually. So you said earlier that you were
Speaker 1: invested in China when everyone else was running slightly scared
Speaker 1: a little while ago. Are you still pretty bullished on
Speaker 1: China or is that move gone as far as it's
Speaker 1: going to go. Do you think?
Speaker 2: I think China might not be the bargain vein like
Speaker 2: what we have seen two years back, given how much
Speaker 2: the market has rallied. But then again, I think it
Speaker 2: is a big market with steps as well as bread
Speaker 2: for bottom up stock pickers like ourselves to really find
Speaker 2: the attractives value for our trust holders, so we remain
Speaker 2: invested in the market. I actually brought the trust border
Speaker 2: directors to train the trip and of last year. I
Speaker 2: think everyone was just amazed by the level of development
Speaker 2: that we have observed over the past two years, because
Speaker 2: we do the trip every other year and it's just
Speaker 2: amazing to see some of the robotics company, look at
Speaker 2: the Eedy company on the progress that they have made
Speaker 2: in terms of products, in terms of their cops. So again,
Speaker 2: there there is just so many opportunities for us to
Speaker 2: pick from. That's why we remain excited about investing.
Speaker 1: Yeah, I suppose that the pushback against that would be
Speaker 1: that it's not necessarily the case that either economic growth
Speaker 1: or that technological development will translate into rising share prices
Speaker 1: in a difficult political environment. Yeah, I think this.
Speaker 2: Political environment actually that's probably one of the main conferences
Speaker 2: that people have as well as the other one is
Speaker 2: the housing market. That one of the most common pushbacks
Speaker 2: that we get from clients. But the reality, I think
Speaker 2: the covering the policy regime do provide a very good
Speaker 2: sort of environment for technology companies to develop their products,
Speaker 2: and that progress that we have seen in terms of
Speaker 2: ev robotics in the AI trinity China, and then on
Speaker 2: the other side of the housing market housing bubble. China
Speaker 2: fortunate enough to avoid a b of housing bubble. It
Speaker 2: has been a very painful sort of eRating carried for
Speaker 2: the reality date sector, for the reality developer. But do
Speaker 2: you think it's a better shut up then let everything
Speaker 2: run to the hillcop and then suddenly birthed That might
Speaker 2: take China ten or even twenty years to come back
Speaker 2: where it were.
Speaker 1: So it has been.
Speaker 2: Painful, But for the firm itself, I think we have
Speaker 2: avoided a lot of the real state investment in China itself.
Speaker 2: Now we are actually getting a little bit more hopeful
Speaker 2: of what to come with this sector because regulations start
Speaker 2: to lose them a little bit more and we start
Speaker 2: to see activities take up here there, especially in Hong Kong.
Speaker 2: So when the market is deal fall, maybe it's a
Speaker 2: sector that we can spend more time on and try
Speaker 2: to do a little bit more.
Speaker 1: I suppose it's two things to say about the housing
Speaker 1: residential construction problem in China. The first is that without
Speaker 1: household formation, it's quite difficult for that market to pick
Speaker 1: up again. And if we're talking about very fast falling
Speaker 1: fertility and a smaller number of babies, smaller number of marriages.
Speaker 1: It's household formation that drives housing purchase, right, So that's
Speaker 1: that's a problem.
Speaker 2: So I think that was one of the key reasons
Speaker 2: why we stayed away. You know, pricing was affordability was
Speaker 2: very poor, especially in the bigger cities, the capital studies
Speaker 2: of China, and then house information weigh as well as
Speaker 2: the true immigration into the Tier one cities is slowing down.
Speaker 2: So all that just doesn't support the demand side of saints.
Speaker 2: And then looking at the supply I think five years
Speaker 2: ago to keep coming up into the train to market,
Speaker 2: but later over the past five years that is committed many. Oh,
Speaker 2: then it's really a question of when the supply demand
Speaker 2: can bat us out. So we find a bottom of
Speaker 2: the pricing cycle in Chyna real estate market, we start
Speaker 2: to see some fint of that might STUPI supposially.
Speaker 1: The other things about it is that a huge amount
Speaker 1: of the Chinese population savings have traditionally gone into properties,
Speaker 1: as seventy percent of NetWorld is tied up in property,
Speaker 1: and any shift away from that into people maybe putting
Speaker 1: their savings into the market instead or possibly something more
Speaker 1: productive than blocks of flats is a positive long term positive.
Speaker 2: Definitely, and I and we start to notice them any
Speaker 2: more money on travel experiences, especially the younger population locally,
Speaker 2: back again to the age world investment is also trying
Speaker 2: to really understand what the new generations want. They might
Speaker 2: not want to spend all the savings our house, but
Speaker 2: because I had a small money here and there, a
Speaker 2: costumer product or traveling to really increase the enjoyment of
Speaker 2: their lack. Yeah.
Speaker 1: So do you think that consumer boom that we've been
Speaker 1: waiting for in China for such a long time might
Speaker 1: finally be nearly upon us.
Speaker 2: I think everyone has grewn up for the housing market
Speaker 2: to rebound, and the infection of the stock market has
Speaker 2: certainly enriched a certain group of the Chinese consumers. They
Speaker 2: have hand up demand for quite a while. Now they
Speaker 2: start to feel happy and try to span again. I
Speaker 2: think in the past investor also had a misconception that
Speaker 2: the consumption in China equals to housing price. But it's
Speaker 2: not like that. It doesn't happen everywhere in the world.
Speaker 2: Even the UK housing price hasn't done off, hasn't done well.
Speaker 2: I think the UK costumers you spand and so I
Speaker 2: think Chinese our serios are coming out of that cycle
Speaker 2: and they do want to band in certain areas. So
Speaker 2: again that or because we just have to find out
Speaker 2: where they want to span, which companies can gain more
Speaker 2: market share, we are to write that way, what.
Speaker 1: Of the sectors are you interested in in China? Then
Speaker 1: we talked about the hotel company as they say, this
Speaker 1: is such a massive market, where are you focused for?
Speaker 1: So another top.
Speaker 2: Holding of the trust is is kinda resources to sphere.
Speaker 2: So this is one of the largest brewery in China.
Speaker 2: They have about twenty five percent market share. They used
Speaker 2: to trade over fifty times prior to earnings Racial before
Speaker 2: COVID and since the deflationary cycle and the consumption worry
Speaker 2: in China hit the market, they now trade at the
Speaker 2: low King's price to earning Racial, a level that we
Speaker 2: see extremely attractive. But what has uh There is constant
Speaker 2: concern about the Again, the younger people do not want
Speaker 2: to drink anymore, I do a blot to their health consciousness. Again,
Speaker 2: China resource spear do have their own narratives of increasing
Speaker 2: their brand premiumization. They acquire the Heinecome brand, their China
Speaker 2: operation about five six years ago. I think then they
Speaker 2: have integrated the product distribution into their portfolio, continue to increase,
Speaker 2: brought up volume as the percentage of total volume, and
Speaker 2: that premiumization really helped them with ASP growth as well
Speaker 2: as Marti expansion. I just think the current evaluation doesn't
Speaker 2: give them justice, and management has been increasing trailholder return
Speaker 2: aggressively old harp years very backfully. We get paid while
Speaker 2: waiting for market to realize the underline value of this company.
Speaker 1: Can we talk a bit about about Korea, which, as
Speaker 1: I said, I wrote about the bet eighteen months ago,
Speaker 1: so saying like this is following the corporate governance path
Speaker 1: of Japan and its too cheap, and it has done
Speaker 1: that to a large degree, followed that path, and in
Speaker 1: regulatory terms, certainly, but it's not really cheap anymore, is it? Yes?
Speaker 2: And no? I guess, because I guess Korea has done
Speaker 2: extremely well. Twenty thirty five, its doubled in the US
Speaker 2: dollar term, almost double US dollar term, and then it
Speaker 2: had hit several street spots. The value up government initiatives.
Speaker 2: Have you highlighted The second one is really the strong
Speaker 2: clical upturn of the memory cycle and the Spianic Sometimes
Speaker 2: electronics make a big proportion of the coffeing decks, and
Speaker 2: I would say historically we always have to view the
Speaker 2: Korean discount for poor shareholder return for corporate government is
Speaker 2: a bit exaggerated. A lot of the companies we owned
Speaker 2: for years in our portfolio have actually been steadily increasing
Speaker 2: their shareholder return uh the top down initiative from the
Speaker 2: government to do it are board based with their characteristics
Speaker 2: initiatives that really changed investors mindset of the market. So
Speaker 2: suddenly we have seen are the board based stock cascelation
Speaker 2: by bad term re shared cascelation and increase in payout, etcetera.
Speaker 2: And a lot of our populo company just continue their
Speaker 2: past and all of this basically narrow the so called
Speaker 2: Korean discount that we have seen in the past. And
Speaker 2: then for the memory cycle, I think it's just completely
Speaker 2: separate from this theme memories they look at forty years ago,
Speaker 2: there are money or even more memory producers out there,
Speaker 2: and fart forward to where we are today. As the
Speaker 2: series of aggressive competition, we pretty much only left with
Speaker 2: three global eating players. That oligopolistic structures just made this
Speaker 2: industry a lot more predictable as competitive before, and if
Speaker 2: we look at what they have done over the past
Speaker 2: few years, they have been burned in the last cycle,
Speaker 2: so they had decided to all keep their capects a
Speaker 2: lot more rational. So the supy that we have seen
Speaker 2: in the past few years, she's been picked eyed and
Speaker 2: the AI demand search definitely not in all of the
Speaker 2: memory producers three years back. As a result of that,
Speaker 2: we have just seen this extreme bomb in any of
Speaker 2: the memory bus that you name it. It had gone
Speaker 2: up oh at the unprecedented rate, even though all of
Speaker 2: them are dividing to increasee that back in twentynine six,
Speaker 2: we won't be that supply coming to the market probably
Speaker 2: seven or eight, which means the type supply and this
Speaker 2: will remain for the remainder of the year. As for
Speaker 2: the fund with days in memory, but again we talk
Speaker 2: about how we invest with the valuation discipline. With where
Speaker 2: show price had been over the past year, the level
Speaker 2: of return would has come down, so we just takes
Speaker 2: some off off the table.
Speaker 1: Yeah, so feeling a little bubbly, I mean that that
Speaker 1: scene translates across to Taiwan right where tech is the
Speaker 1: big driver. Are you happy there?
Speaker 2: So Taiwan is the AI theme is a very prevalent
Speaker 2: uh and more broad based as compared to Korea. So
Speaker 2: for Taiwan our topic in the market TSMT, would you
Speaker 2: be them as the uncontested global leader in foundry space.
Speaker 2: And if you look at the Ai revolution Global revolution,
Speaker 2: SMCS basically steal the engine behind all of that. That
Speaker 2: remains as the biggest holding of the trust. But then
Speaker 2: there are selective pockets of the talentice market. We do
Speaker 2: think expectation is extremely high in terms of the volume
Speaker 2: treatment of the product content creation, the dollar content of
Speaker 2: the products in the Ai further as well as the
Speaker 2: Marji expansion that people expect some of the talentice companies
Speaker 2: to experience. So we do have an out of the
Speaker 2: way position in Taiwan right now, just because the heightened
Speaker 2: expectation heightened the variation that's compared to history, the gruct
Speaker 2: real world doesn't look at the attractive for the BODER market.
Speaker 1: Thinking with Taiwan, how much of a concern is that
Speaker 1: when you're investing in Taiwan that intense geopolitical stress. Yeah,
Speaker 1: I think it's definitely.
Speaker 2: A count that we have. We always keep back of
Speaker 2: a mind because for my team, we don't just manage
Speaker 2: Asian money off emerge market money. And we have actually
Speaker 2: been to the Russian situation. So you know, two years
Speaker 2: ago when we talk about what China is investing, or
Speaker 2: want to key debate whether the training market, if anything
Speaker 2: happened to Taiwan between Taiwan and China, that the Chinese
Speaker 2: market could effectively go to zero in our index. So
Speaker 2: that's a risk we constantly discuss. But then you know,
Speaker 2: investors give us money to try to manage a portfolio
Speaker 2: of Asia assets. We do take think geopolitical risks in
Speaker 2: the consideration, but I do think our end investors they
Speaker 2: want to have a blod based exposure to the Asia region.
Speaker 2: Otherwise they could have chosen a bit more of a
Speaker 2: country allocation, try to avoid investing China or invest in Taiwan.
Speaker 2: Is they do want to have an Asia fund. Our
Speaker 2: job is really try to manage all this risking a colturists,
Speaker 2: the tariff risk, all of these things. Try to take
Speaker 2: all of my stocks that have the minimizing impact from
Speaker 2: any of this. And TFMC being the biggest holding the trust,
Speaker 2: I do think their diversification of their foundries across the region,
Speaker 2: and that goes to the US is the right strategy
Speaker 2: for them to survive the long term.
Speaker 1: So what are your the main worries? We worry about geopolitics,
Speaker 1: obviously worry a lot about valuations in the extent which
Speaker 1: particularly AAR related stocks are in any kind of bubble territory.
Speaker 1: Less So, now, obviously what else have these a long
Speaker 1: list of potential risks? What are the ones that keep
Speaker 1: you up at night? Again, it's a bottom up topicker.
Speaker 2: So I do have a few things that I like
Speaker 2: it give me awake a night. I think the first
Speaker 2: thing is try to not overpay with magician defensive for
Speaker 2: individual stocks, for individual markets, I try to stay away
Speaker 2: from it. I think India being example. All that so
Speaker 2: that was one of the market we were aggressively on
Speaker 2: the way being the second half of twenty three. That
Speaker 2: is just the nerves ritical old pay. You don't want
Speaker 2: to be the last one to buy the hype. And
Speaker 2: then the second risk I think about is my company's
Speaker 2: alan sheet. But do you see that as a heavy backpack.
Speaker 2: But the road is flat, anyone can carry it when
Speaker 2: you hit a hill. Really, the one with a heavy
Speaker 2: dead can be dragged down. I want to pick the
Speaker 2: stocks by Stanton in Western to be the marathon winners.
Speaker 2: So I do pay a lot of attention to company
Speaker 2: s boansheet and then laugh not this resputation. Is my
Speaker 2: portfolio diversified enough? Is it just being driven by this
Speaker 2: super EI cycle or there is? I actually wander sure
Speaker 2: there is a wide range of drivers, sectors, idiosyncretic drivers
Speaker 2: of the individual company that if one road hit the bomb,
Speaker 2: the other one will actually make it all right.
Speaker 1: And how are you managing currency risk? Lots of talk
Speaker 1: about China and currencies at the moment, but where the
Speaker 1: dollar might go from here and how that relationship might
Speaker 1: work out? How do you think about that?
Speaker 2: Yeah, the reality is if you think about the Asia,
Speaker 2: currencies still have been relatively stable versus each other over
Speaker 2: the longer term. I think last year was the if
Speaker 2: native prominence the reversion of that trend, but that is
Speaker 2: mostly of a US dollar weakness against all the currencies.
Speaker 2: So Taiwan is a good example. We see a sudden
Speaker 2: step up in the Tawan dollar again against the US
Speaker 2: dollar at one point in twenty twenty five.
Speaker 1: That really did market a big shock.
Speaker 2: But what is the good from the Tawanese company is
Speaker 2: they do have a lot of revenue as well as
Speaker 2: coch in the US dollar. Even with the magnet currency appreciation,
Speaker 2: we have actually seen the company level managed on pretty well.
Speaker 2: So it's a black thing that we have in that.
Speaker 2: Seeing Asia, there's no major currency shocks that we have
Speaker 2: seen so far. Touch Wood on China, I think they
Speaker 2: are a lot more cautious with regard to how they
Speaker 2: moved the currency. There was a a few years back.
Speaker 2: I think suddenly that to bring a lot of negative
Speaker 2: country quences with regard to capital outflow as well as
Speaker 2: the how US a global all the other countries perceived China.
Speaker 2: So now we can see them a lot steadier with
Speaker 2: the CNY story age rate, you know, all of that.
Speaker 2: For what remains for us, we really bring it down
Speaker 2: to a Bottomas stock level. If this is an exporter,
Speaker 2: we will be a lot more careful with their currently exposure.
Speaker 2: But then a lot of the potful company are actually
Speaker 2: domestic facing. Uh, they don't really need to manage that
Speaker 2: currency rift to a Questionably.
Speaker 1: Let's go back to India. So India expensive, any interesting
Speaker 1: holdings there in their portfolio that aren't too expensively you're
Speaker 1: happy with? Yeah?
Speaker 2: So the founder is alway the Indian financial Again, we're
Speaker 2: not trying to buy index. We try to buy the
Speaker 2: stocks India at the index level, we're still sing is
Speaker 2: expensive trading over twenty tnkey for the level of the
Speaker 2: roles of the naxation not very attractive. But then selected
Speaker 2: financial thing the Indian market looks very very interesting. Whina
Speaker 2: did the polo company that we bought during the COVID
Speaker 2: crisis did the non bank financial institution they give loan
Speaker 2: like second half a second hand. All the loans go
Speaker 2: loans to the rural as an easter that this company
Speaker 2: has managed it credit cycle it truly well and grow
Speaker 2: diversified a portfolio. First battle with the take a hand
Speaker 2: all along them, gradually to all the other long segments
Speaker 2: catering to the dainful holder customers through the here growing
Speaker 2: together where we ran with be their shareholder and hoording
Speaker 2: their growth. And we get a capital from being from
Speaker 2: AMFT you one of the biggest Japanese financial institution to
Speaker 2: giving them access to even cheaper credit andabling them to grow.
Speaker 2: They have a target of growing their own book at
Speaker 2: eighteen an for the next few years. So we are
Speaker 2: dealt one of the top holdings in the trust okay.
Speaker 1: Interesting, all right, Well let's escape to Vietnam, which was
Speaker 1: always everyone's favorite emerging Asian market for a long time,
Speaker 1: wasn't it. We had constant stories about Vietnam, and of
Speaker 1: course sours some dedicated Vietnam trust. But how are you
Speaker 1: feeling about that that story? Hole?
Speaker 2: I think Vietnam has up and down, but also because
Speaker 2: of the politics happening there, and what we are seeing
Speaker 2: now is a period of the wealthy stable poltics that
Speaker 2: you're provided in workers to really pick stocks. If I
Speaker 2: look at the stocks in Vietnam, there are actually very
Speaker 2: exciting a major companies to pick from. Recently we met
Speaker 2: with the ID Services Company in Vietnam. They are trying
Speaker 2: to address a different campto more cohord as compared to
Speaker 2: the Indian IT Services Company. There be to be successful
Speaker 2: and evaluation doesn't look too expensive, uh with all this
Speaker 2: global AI trying to destroy IT Services company a software company,
Speaker 2: something that we are practically working on. And then we
Speaker 2: also owned some of the customer stables company in Vietnam.
Speaker 2: In terms of the demographic trend, Vietnam, the aging population
Speaker 2: is definitely at the slower pace as compared to other regions.
Speaker 2: In the market we have been how the other customer
Speaker 2: company has evolved in other market. So if you there
Speaker 2: are pocket opportunities in Vietnam as well. I think as
Speaker 2: for investors, we still face the contrain of ownership threshold.
Speaker 2: The best company might not be available to buy for Invesco,
Speaker 2: Arab and Frost that the struggle will continue to face
Speaker 2: in a market over time. We have observed market access
Speaker 2: has improved.
Speaker 1: Yeah, And are there any smaller markets in the region
Speaker 1: that people simply aren't paying attention to and should be. Yeah.
Speaker 2: So I think Southeast Asia as the block is very interesting.
Speaker 2: But we talk about the g gratification of global spy
Speaker 2: tang China plus one. It benefits countries like not just Vietnam,
Speaker 2: but also Thailand as well as Indonesia. And if you
Speaker 2: look at the evaluation, extremely cheap right for CREATI about
Speaker 2: one point three one point four times and as a
Speaker 2: discount to your own training history as well as the
Speaker 2: Asia global market. But then that a region all this
Speaker 2: world creation from supply time digasifications and actually sustained decades
Speaker 2: of growth, So you're really getting up from feed of
Speaker 2: rapid growth at a garden price. We are all wait
Speaker 2: in posses Asia having more based the sectory exposure there.
Speaker 1: So all in all, Fiona, you would expect I think
Speaker 1: this rotation maybe out of the US and into all
Speaker 1: the countries that you're interested to continue over the next
Speaker 1: couple of years. So even the evaluations across the region
Speaker 1: are not as low as they were, it's still a
Speaker 1: significant discount perhaps to the global markets as a whole.
Speaker 1: So you I'm guessing here, assuming you're going to say yes,
Speaker 1: pretty happy with your positions over the next year or so.
Speaker 2: Yes, absolutely. I think for investors, you know, in twenty six,
Speaker 2: maybe they should check their home buyers check whether they
Speaker 2: are over exposed to US assets. Even as your own
Speaker 2: SB five hundred index, your exposure to the US tech
Speaker 2: might be over forty PREFN. A concentration risk is real.
Speaker 2: So Asia do offer a cheaper alternatives. Getting you access
Speaker 2: to a vast region of different countries and different sectory
Speaker 2: exposure is a real damification, not just another hicker.
Speaker 1: No, thank you so much for joining us today. That
Speaker 1: was really interesting conversation.
Speaker 2: Thank you Marion for having me, Ama Shall.
Speaker 1: Thanks for listening to this week's Maren Drugs Money. If
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Speaker 1: am at marins w and John is John Underscore strap Back.
Speaker 1: This episode was hosted by Me Maren Sunset Web. It
Speaker 1: was produced by Sammisadi and Moses and time designed by
Speaker 1: Blake Maples and Aaron Kasper. A special thanks, of course
Speaker 1: to Fia me Yang