Robeco logo

Disclaimer

1. General
Please read this information carefully.

This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 2 (dealing in futures contracts); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.

2. Important risk disclosures
Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:

  • Some Funds are subject to investment, market, equities, liquidity, counterparty, securities lending and foreign currency risk and risk associated with investments in small and/or mid-capped companies.

  • Some Funds are subject to the risks of investing in emerging markets which include political, economic, legal, regulatory, market, settlement, execution, counterparty and currency risks.

  • Some Funds may invest in China A shares directly through the Qualified Foreign Institutional Investor (“QFII”) scheme and / or RMB Qualified Foreign Institutional Investor (“RQFII”) scheme and / or Stock Connect programmes which may entail additional clearing and settlement, regulatory, operational, counterparty and liquidity risk.

  • For distributing share classes, some Funds may pay out dividend distributions out of capital. Where distributions are paid out of capital, this amounts to a return or withdrawal of part of your original investment or capital gains attributable to that and may result in an immediate decrease in the net asset value of shares.

  • Some Funds’ investments maybe concentrated in one region / one country / one sector / around one theme and therefore the value of the Fund may be more volatile and may be subject to concentration risk.

  • The risk exists that the quantitative techniques used by some Funds may not work and the Funds’ value may be adversely affected.

  • In addition to investment, market, liquidity, counterparty, securities lending, (reverse) repurchase agreements and foreign currency risk, some Funds are subject to risk associated with fixed income investments like credit risk, interest rate risk, convertible bonds risk, ABS risk and the risk of investments in non-investment grade or unrated securities and the risk of investments made in non-investment grade sovereign securities.

  • Some Funds can use derivatives extensively. Robeco Global Consumer Trends Equities can use derivatives for hedging and efficient portfolio management. Derivatives exposure may involve higher counterparty, liquidity and valuation risks. In adverse situations, the Funds may suffer significant losses (even a total loss of the Funds’ assets) from its derivative usage.

  • Robeco European High Yield Bonds is subject to Eurozone risk.

  • Investors may suffer substantial losses of their investments in the Funds. Investor should not invest in the Funds solely based on the information provided in this document and should read the offering documents (including potential risks involved) for details.

3. Local legal and sales restrictions
The Website is to be accessed by “professional investors” only (as defined in the Securities and Futures Ordinance (Cap.571) and/or the Securities and Futures (Professional Investors) Rules (Cap.571D) under the laws of Hong Kong). The Website is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of the Website is prohibited. Persons in respect of whom such prohibitions apply or persons other than those specified above must not access this Website. Persons accessing the Website need to be aware that they are responsible themselves for the compliance with all local rules and regulations. By accessing this Website and any of its pages, you acknowledge your agreement with understanding of the following terms of use and legal information. If you do not agree to the terms and conditions below, do not access this Website or any pages thereof.

The information contained in the Website is being provided for information purposes.

Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.

4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.

5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.

Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.

6. Third party websites
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage. Third party off-site pages or websites are provided for informational purposes only.

7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.

Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.

Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.

8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.

9. Privacy
Robeco guarantees that the data of persons accessing the Website will be treated confidentially in accordance with prevailing data protection regulations. Such data will not be made available to third parties without the approval of the persons accessing the Website, unless Robeco is legally obliged to do so. Please find more details in our Privacy and Cookie Policy.

10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong.

Please click the “I agree” button if you have read and understood this page and agree to the Disclaimers above and the collection and use of your personal data by Robeco, for the purposes for which such data is collected and used as set out in the Privacy and Cookie Policy, including for the purpose of direct marketing of Robeco products or services. Otherwise, please click “I Disagree” to leave the website.

I Disagree

15-05-2023 · Insight

Asia: A once-in-a-decade opportunity

The long-term opportunity to gain exposure to Asia-Pacific equities is currently being obscured by a resilient US dollar and geopolitical worries which ignore the region’s solid macroeconomic advantages.

    Authors

  • Joshua Crabb - Head of Asia-Pacific Equities

    Joshua Crabb

    Head of Asia-Pacific Equities

  • Helen Keung - Client Portfolio Manager

    Helen Keung

    Client Portfolio Manager

Summary

  1. Valuation gap with US still enormous and contrary to macro fundamentals with reopening occurring

  2. Asia ex-China economies can benefit from China offshoring, and remain key US trade partners

  3. Asia-Pacific investment universe offers unrivalled combination of diversity, value and growth potential

US dollar resilience does not undermine fundamentals in Asia-Pacific

The first half of 2023 has been a false start for Asia Pacific equities with optimism over China re-opening fading and the Fed’s hawkish stance surviving the ongoing sequence of mid-size US bank failures, supporting the US dollar. This has left Asia Pacific markets treading water and especially as concerns over the outlook for high value exports like semiconductors to the slowing US economy have increased.

This absence of short term catalysts is keeping investors on the sidelines but we think the long-term structural foundations of Asia-Pacific should be more important, and will assert themselves over time, making this an opportune moment to invest in Asia-Pacific ahead of the next era of growth.

Figure 1: Price-to-book valuation gap is enormous

Figure 1: Price-to-book valuation gap is enormous

Source: MSCI, Bloomberg.Price-to-book MSCI Asia ex Japan and S&P 500 indices. Data range: Dec 2000 to April 2023

The valuation gap is not justified

The valuation gap remains enormous, despite the slow-burning banking crisis in the US, and the S&P 500 has outperformed relative to Asia-Pacific markets. In previous cycles, post the dotcom bubble and after the global financial crisis, this kind of gap has heralded a strong and long period of outperformance for Asia-Pacific. In addition, Asia Pacific economies are not suffering from high inflation in the same way as Europe, the US or some emerging economies. This gives governments in the region policy flexibility, and supports our view that macro fundamentals will start to be reflected in relative equity valuations.

Get the latest insights

Subscribe to our newsletter for investment updates and expert analysis.

Don’t miss out

ASEAN will thrive as US-China face-off

The structural set up for Association of Southeast Asian Nations (ASEAN) economies is already positive. The combined GDP of ASEAN countries in 2019 was valued at USD 3.2 trillion – making ASEAN the fifth-largest economy in the world, and it’s tracking to become the fourth largest by 2030 as the region sucks in foreign direct investment at an accelerated pace. With a total population of about 700 million people, 61% under the age of 351 – combined with improving educational attainment and mass digital adoption, the contrast with North East Asia and Europe is stark.

ASEAN economies will, alongside India, be key beneficiaries of the China offshoring trend, where foreign companies are trying to build more redundancy and resilience into their supply chain by setting up manufacturing elsewhere, with some Chinese companies following suit2. This will see ASEAN companies further embedding themselves as key links in the global supply chain for technology and manufactured goods. Given ongoing tension between the two global powers, ASEAN economies are in our view likely to play both sides and from a trade perspective at least will seek to take a neutral stance. In addition, the consumer space in ASEAN offers exciting long-term winners that will grow with an increasing shift towards consumption in the region. We are riding both trends as part of our Asia-Pacific equity strategy.

ASEAN equities have very strong medium-term prospects at good valuations

India valuations have reset

At the start of 2023 we believed that valuations in India were stretched and we were very underweight relative to the index. Since the Adani group of companies corrected after being targeted by short sellers, the wider market was dragged down as a consequence, making some long-term value ideas more attractive. We are not only focused on the China offshoring trend but are also keen to find consumption plays. We believe digital adoption by Generation Z and younger is a structural shift that will allow even those in rural areas, previously excluded from the consumer economy, to become more economically active going forward. Deepening internet penetration means that close to 77% of the country’s population will be internet and technology savvy by 2030. This has the potential to turbocharge the existing demographic advantages India possesses.

Nevertheless, we remain underweight India, and will only accumulate what we consider the very best ideas rather than just pure India growth proxies, or the traditional large cap technology names that mainly serve developed markets.

North East Asia

The mature economies of North East Asia don’t share the same demographic advantages as the younger nations to the south but still host exciting investment opportunities.

Even under US-China ‘decoupling’, other countries can benefit from supply chain diversification. South Korea’s position as a key player in semiconductors and display technology has been augmented by other industries set to serve the energy transition, including a strong position in electronic vehicle batteries which are benefiting directly from the US choosing to exclude China-based suppliers from tax breaks under the Inflation Reduction Act. After a weak 2022 due to the semiconductor and tech cycle rolling over, South Korean equities have performed strongly in 2023, reflecting the resilient domestic economy and in anticipation of South Korea being potentially reclassified as a developed market by MSCI which would yield inflows from a rebalancing effect3. For us, South Korea is a country where we find plenty of companies with value and earnings turnaround stories.

Like South Korea, the Taiwan market suffered as technology sold off in 2022. We now think the semiconductor cycle may have bottomed, offering good entry points to long-term investors. Obviously there is a geopolitical overhang in Taiwan but we consider the prospect of a surprise China invasion very unlikely.

Unlike their counterparts in the US, many South Korean and Taiwanese companies are trading at floor asset valuations, pricing in very little improvement in the economic outlook.

Conclusion: Time to act

The key focus for our portfolio construction in Asia remains avoiding proxies for US or Europe consumption, or stocks that trade at valuations comparable to peers in the US. Within the Asia-Pacific equities universe, we continue to identify companies whose share prices do not reflect the company’s true potential and we believe will re-rate to a higher level.

Macroeconomic weakness in the US and Europe, and recurrent crises in the US, the latest being the ‘debt ceiling’, continue to impact sentiment. On the other hand, financials risks are lower in Asia given more conservative monetary and fiscal policies. In these periods of risk-off the US dollar tends to firm and this is a headwind for our Asia-Pacific strategy. Nevertheless, from our perspective gradually increasing allocation to Asia-Pacific makes sense as the region is strategic to the world’s two dominant economies, and exposure now will capture upside as the valuation gap narrows.

Footnotes

1ASEAN development trajectories reach new milestone – ASEAN.org – 23 August, 2021
2Chinese company moves some production abroad to escape geopolitics – 17 April, 2023
3Why Korea Is Beating Other Asian Stock Markets – WSJ – 26 April, 2023

Important information

The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong. This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions. The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.