It has been a good year to be an equity investor in almost any region, but those focused on Asian markets, both emerging and developed, have been particularly handsomely rewarded. In this note, we discuss how we have positioned portfolios to take advantage of this strength, and in turn consider how this has impacted the performance of the Saunderson House model compared to the peer group and appropriate comparators.
Similarly to many stock markets over the last 12 months, Asia has seen a rotation within equity market leadership. While 2016 was the year that value returned to favour, over 2017 thus far it has been growth stocks that have delivered the strongest returns. However, it has not been those companies with steady, predictable earnings that investors have preferred, as they did for much of the preceding few years. Instead, it has been high growth technology firms, found principally in north Asian countries such as China, South Korea and Taiwan that have led these markets higher, generating extremely strong returns for investors and demonstrating Asia’s shift away from “the factory of the world” towards higher value-added activities. In this environment, the overweight allocation to emerging markets and Asian equities within the Saunderson House model has been a key contributor to performance.
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