CONTRIBUTORS
Ferdinand Cheuk
Portfolio Manager,
Research Analyst,
Templeton Global Equity Group
Hong Kong
The Asia-Pacific (APAC) region offers a diverse opportunity set across its emerging and developed markets. Equity investors exploring the region can aim for an “all-weather” portfolio with balanced exposure to quality companies that can generate growth, and defensive companies with high, stable dividends.
Fast-growing economies. Diversified markets. Vibrant companies. These are some of the attributes that have long attracted global equity investors to APAC, and they remain all the more compelling as the world enters the era of policy uncertainties, supply-chain disruptions and multi-polar geopolitics.
At Templeton Global Equity Group, we share investors’ strong conviction in APAC markets, but we believe a more nuanced approach is necessary to deliver differentiated long-term results. In our view, this should entail fully harnessing the diversity of APAC equities to identify the full spectrum of regional opportunities—from local champions to globally leading companies across both emerging and developed markets (EM and DM).
Just as importantly, investors should also benefit from having a multi-pronged portfolio that combines the growth potential of high-quality companies with the defensiveness of dividend stocks. History shows us that this “quality + yield” approach has led to more stable and superior outcomes compared to other investment styles in the APAC region.
In this article, we will discuss APAC’s compelling growth outlook and diverse investment landscape. We will also examine the track records of having balanced exposures to both quality and yield stocks in the region. We will then offer a quick look at how Templeton Global Equity Group captures these opportunities through bottom-up stock selection and valuation discipline.
In conclusion, APAC remains a high-growth region and a compelling market amid elevated policy, economic and geopolitical uncertainties. Investors exploring APAC will find a diverse and fertile hunting ground with a vast combination of industry catalysts, economic tailwinds and structural themes. However, harnessing the full potential of the region is likely to require a “whole of APAC” perspective that accounts for opportunities across both the emerging and developed economies of APAC; a siloed or piecemeal approach has historically delivered sub-par returns, in our assessment. Just as importantly, we believe investors can compound superior long-term returns through a “quality + yield” portfolio. This diversified positioning—underpinned by valuation discipline, bottom-up fundamentals research and stock selection—may offer the unique benefits of upside growth potential and downside yield protection in one portfolio.
We are encouraged by the results that we have been able to achieve through this “quality + yield” APAC strategy, which has delivered solid performance as we navigated the fluid market conditions since the COVID-19 pandemic.
Our track record affirms our belief that we have a proven solution for APAC investing, and Templeton Global Equity Group aims to continue to stand out as a partner of choice for clients as they explore this dynamic region for opportunities.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Investments in companies in a specific country or region may experience greater volatility than those that are more broadly diversified geographically.
The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries.
There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization, and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Taiwan could be adversely affected by its political and economic relationship with China.
Franklin Templeton and our Specialist Investment Managers have certain environmental, sustainability and governance (ESG) goals or capabilities; however, not all strategies are managed to “ESG” oriented objectives.
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