The Pride - Issue 5 - Autumn 2021 - Magazine - Page 6
TEA M P R O FI LE
Weeding out fraud, counting cranes, and monitoring mudflats...
THE LURE OF
INVESTING IN ASIA
Liontrust’s Asia Income team talks to Lora Coventry about the boom in technology
and healthcare, the shift from state enterprises, and what drew them to investing in
the Asia Pacific region.
Moments after Mark Williams’ day
begins with the loud buzzing of his
morning alarm clock he knows whether
he is having a good or bad day. Since
Mark, head of the Liontrust Asia team,
first started investing in the region 25
years ago, much has changed, but his
daily ritual of checking how the markets
have fared is only different in that the
information is now immediately available.
But that’s the nature of the beast when
you’re investing in Asia, and daily life
for Mark and his co-managers Carolyn
Chan and Shashank Savla, who
together run Liontrust’s Asia Income
Fund. Between them the trio have 60
years’ combined investment experience,
and have seen a dramatic shift over the
course of their careers.
“For me, the biggest change has been
apparent in China,” says Mark. “Just look
at the Bund in Shanghai, where colonial
buildings face the Huangpu River. When
I first visited China in 1990, the opposite
side of the river was just mudflats, now
it’s the equivalent of Canary Wharf. At
the start, much like Canary Wharf, it
was empty, now people queue through
a tunnel to get in.”
Globalisation has also transformed the
populous. “Travelling in China during the
90s was a singular experience. I didn’t
expect to be there – I was hiking a trail
in Pakistan to Kashmir but a landslide
meant that I had to detour via China.
I had no guidebook, couldn’t speak
any of the language, and people were
very nervous to speak with a Western
tourist...afraid of the repercussions. It’s
opened up massively since.”
Moreover, in the past couple of decades
markets have expanded hugely. Carolyn
recalls that at the start of her career she
6 - THE P R I DE - Issue 2 Winter 2018
couldn’t even invest in China. “We now
have more markets than ever before to
consider, and that will only continue to
increase. There are significant growth
opportunities in places like Vietnam
and Pakistan, which feature young
demographics, similar to India.”
She adds that the drivers fuelling Asian
economies’ far superior growth rates
compared to the Western world have
also changed dramatically. “It’s no
longer ‘just an exporter’: intra-Asia trade
is increasingly important, as is domestic
consumption. There’s so much to be
excited about – both as an investor and
personally, too.”
There are significant growth
opportunities in places like
Vietnam and Pakistan, which
feature young demographics,
similar to India.
Shashank points to the loose monetary
policy of the past decade, brought
about by the Global Financial Crisis,
as the biggest change since he started
investing. “We’ve never seen a climate
like this before. Central banks’ response
to that crisis has put us in a new era,
which we’re living through right now.”
He adds that with returns on savings in the
developed world being driven down by
historically low interest rates, there’s been
an increasing interest in equity income
products. “More companies are returning
cash to shareholders – the perception
of Asian companies is that they cling
on to cash in order to grow, but that’s
not always the case,” says Shashank.
Another perception that has not changed
is the notion that corporate governance
in the region is not up to scratch. Mark
adds: “I’m often questioned about
corporate governance in the region, but
look at the developed world – Enron,
Tesco, the UK financial system, to name
just a few. There’s a perception that
there’s poorer corporate governance
in Asia but this ignores the fact that
an investor always has to judge a
company’s likelihood of success.”
The team also believes distinctions
between emerging, developed and
frontier markets are false and unhelpful.
“Why would you spin out Hong Kong
and not judge it alongside India or
Vietnam? It doesn’t make sense. We’re
so accustomed to viewing things from
a developed world perspective, but
our governments have transitioned very
differently, far more slowly, than in
Asia,” says Mark. “China, for example,
has developed at such a rate over
the past 30 years, shifting from state
enterprises to private businesses – that’s
always going to become a different
beast to that which we are used to
seeing. State enterprises had a greater
purpose; some were providing housing,
law enforcement, alongside a typical
industrial function... moving them into
private enterprises will be different, and
we need to treat it as such.”
Shashank believes that the 21st century
will be the “Asian Century”. “We’ve
seen that Western markets are maturing
and aging, but Asian markets are young
and have significant growth potential.
A lot of investors’ holdings are still in
home markets, but there’s good growth
coming out of Asia, and at reasonable
valuations. The switch won’t be a quick
one, but as investors see growth in
developed markets dwindle, and take
off in Asia, they will be willing to invest
more into these places.”