singaporeen
Outperforming in Asia with ‘boots on the ground’

Outperforming in Asia with ‘boots on the ground’

30-01-2018 | Insight

A local presence in Asia has helped to generate outperformance over the past decade, say Robeco’s Chief Investment Officers in the region.

  • Victoria  Mio
    Victoria
    Mio
    CIO Chinese Equities
  • Arnout  van Rijn
    Arnout
    van Rijn
    CIO Asia Pacific

Speed read

  • China’s growth dominates 10 years of operating in Hong Kong
  • Outperformance is thanks to being closer to investments
  • Finding investor-friendly companies is key to future success

Arnout van Rijn and Victoria Mio attribute the success of their flagship equity strategies to opening an office in Hong Kong in 2008, enabling local access to the companies in which they invest. They previously managed the strategies as part of the emerging market equities team in Rotterdam.

As the office celebrates its 10th anniversary in January 2018, both managers have been looking back on what has been achieved in the past decade, and what they expect in the next 10 years. They say the growth of China as a superpower has been the biggest development, an opportunity that is now accessible by Robeco clients in a new Chinese Equities A-shares strategy.

“The real reason to move here was to be closer to the investments, and that’s made a big difference, especially as Hong Kong is the financial center of the region,” says Van Rijn, Chief Investment Officer and portfolio manager of Robeco Asia-Pacific Equities. “When we set up the process for Emerging Markets Equities in the mid-1990s, we had to include a strong top-down element, because we were so far away from the investments.”

Robeco Singapore Private Limited

12 Marina View 
#10-02, Asia Square Tower 2 
Singapore 018961 
Email: robecosg@robeco.com
Tel: +65 6909 6898

Contact

Bottom-up driven

“Here in Hong Kong we can be very bottom-up driven, meet our companies regularly, and hear more interesting stories from them about how the Chinese economy in particular is doing, rather than just relying on the economists. The companies can really tell you what is going on – such as if their margins are under pressure, or if their revenue is really picking up.”

“That was an important reason why we turned more bullish at the end of 2016 on Asia as a whole; the Chinese companies that we were meeting signaled that business was improving, and we didn’t see that in the analysts’ projections. China was not imploding: it was getting better, and companies’ earnings would benefit.”

This kind of local access has been key in building the knowledge that is essential for successful asset management, says Mio, Chief Investment Officer and portfolio manager for Chinese Equities. “We are really close to the ground, so we have better access to the companies, policymakers, industry experts and analysts,” she says.

“This helps us to build stronger convictions and fundamental research for the strategies. The fact that we have boots on the ground and are meeting more with managements and all the related parties helps us to understand the local business environment.”

Range expands

Robeco’s Asian equities range has expanded since the office opening to include Asian Stars Equities (2011) and Chinese A-shares (2017). And there are certainly plenty of stocks to choose from when building these portfolios.

“The biggest change over the past 10 years has been the continued growth of the Chinese equity market, with new companies added almost every day,” Van Rijn says. “The Asia market has become more mainstream, and the opening up of the Chinese market has coincided with the growth of Asian companies.”

The performance figures presented above correspond to the D USD share class of the Robeco Asia-Pacific Equities UCITS fund. Performance for other share classes may vary. Performance over one year is annualized. The value of your investments may fluctuate. Past results are no guarantee of future performance. In reality, costs such as management fees, transaction and other costs are also charged. These have a negative effect on the returns shown All data to 31 December 2017.

The Hong Kong office now has about 25 staff, including eight investment professionals and another three in Shanghai handling purely Chinese equities. In total the teams are responsible for assets under management which now stands at USD 9 billion. Some things have not changed though – the Hong Kong team is still regularly in touch with HQ in Rotterdam.

“We’re still very much part of the emerging market equities set-up in Rotterdam as basically an outpost applying the same investment tools,” says Van Rijn. “We use the same valuation models, quantitative ranking models and charting techniques, among other things, so we’re basically speaking the same language and ideas often develop parallel to one another.”

The performance figures presented above correspond to the D USD share class of the Robeco Chinese Equities UCITS fund. Performance for other share classes may vary. Performance over one year is annualized. The value of your investments may fluctuate. Past results are no guarantee of future performance. In reality, costs such as management fees, transaction and other costs are also charged. These have a negative effect on the returns shown. All data to 31 December 2017.

Best investments to date

So what have been their best investments thus far, and what do they avoid? Mio prefers the technology and consumer sectors, as these are major themes for China. “China is rebalancing; the proportion of ‘new economy’ stocks in the MSCI China index overtook that of ‘old economy’ companies in 2015, and now accounts for 55% of it. In this old economy, I avoid the commodities; there has been overcapacity and they are highly pollutive, with some bad corporate governance due to a lot of state-owned enterprises in this space.”

Van Rijn likes any company with a focus on shareholder returns, paying good dividends and buying back its shares. “That will also be a theme for Asia in the next 10 years – the companies that are actually serving the interests of shareholders will be rewarded by the market,” he says. “It is an important focus for portfolio composition; we look for companies that have upside and are clearly showing that they will improve their shareholder return policies.”

“We do have big exposure to banks; they are cheap and business gets better in the short run, but in the long run they’re less attractive, since in most countries they’re not free to move as they like because government policies determine what they can do to a certain extent.”

Focusing on China

For the coming decade, both managers say the primary focus will be on Chinese growth. “There are two main themes in China – technology and consumption,” says Mio. “The internet industry is moving from e-commerce to mobile gaming, online travel, social advertising, internet finance and cloud computing. The second-most important theme is the consumption upgrade story, with a rise in demand for electric cars, education, health care, travel and high-end consumer products.”

And don’t forget the rest of Asia. “A lot of the focus is on China, but Japan is also a really crucial market, with almost half our Asia-Pacific assets invested there,” adds Van Rijn. “We’re also heavily invested in South Korea, as we think corporate governance improvements have been quite tangible in both these countries. We’re expecting to benefit from a re-rating of the multiples of those markets.”

“When you look at all the Asian markets over the last 10 years, some have had quick spells of being in favor; Indonesia was popular for a while, along with Thailand and the Philippines, but a lot of that faded as soon as the Chinese economy started to improve. Australia is a large market with good shareholder returns. India has high expectations now but will eventually become a large market for us too. We closely cooperate with the portfolio managers from Canara Robeco there.”

Important information

This information is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation.
The contents of this document have not been reviewed by the Monetary Authority of Singapore (“MAS”). Robeco Singapore Private Limited holds a capital markets services license for fund management issued by the MAS and is subject to certain clientele restrictions under such license.
An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

Logo

Important Information

Warning/Important note: This website contains information which is only available to qualified investors as defined below. If you are not a qualified investor, please click “I Disagree” to leave the website.

By clicking on "I agree", I declare that: 

  • I am a qualified investor as defined under 1
  • I have read and understood the Terms and Conditions and Disclaimers as described under 2

1 - This website may only be accessed directly or indirectly by the following persons in Singapore:

1) “institutional investor” under section 304 of the Securities and Futures Act (Cap.289)(“SFA”), which means:
(i) the Government; (ii) a statutory board as may be prescribed by regulations made under section 341 of the SFA; (iii) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is (A) to manage its own funds; (B) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or (C) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; (iv) any entity (A) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and (B) whose funds are managed by an entity mentioned in sub-paragraph (iii); (v) a central bank in a jurisdiction other than Singapore; (vi) a central government in a country other than Singapore; (vii) an agency (of a central government in a country other than Singapore) that is incorporated or established in a country other than Singapore; (viii) a multilateral agency, international organisation or supranational agency as may be prescribed by regulations made under section 341 of the SFA; (ix) a bank that is licensed under the Banking Act (Cap.19); (x) a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap.186); (xi) a finance company that is licensed under the Finance Companies Act (Cap.108); (xii) a company or co-operative society that is licensed under the Insurance Act (Cap.142) to carry on insurance business in Singapore; (xiii) a company licensed under the Trust Companies Act (Cap.336); (xiv) a holder of a capital markets services licence; (xv) an approved exchange; (xvi) a recognised market operator; (xvii) an approved clearing house; (xviii) a recognised clearing house; (xix) a licensed trade repository; (xx) a licensed foreign trade repository; (xxi) an approved holding company; (xxii) a Depository as defined in section 81SF of the SFA; (xxiii) an entity or a trust formed or incorporated in a jurisdiction other than Singapore, which is regulated for the carrying on of any financial activity in that jurisdiction by a public authority of that jurisdiction that exercises a function that corresponds to a regulatory function of the Authority under this Act, the Banking Act (Cap.19), the Finance Companies Act (Cap.108), the Monetary Authority of Singapore Act (Cap.186), the Insurance Act (Cap.142), the Trust Companies Act (Cap.336) or such other Act as may be prescribed by regulations made under section 341 of the SFA; (xxiv) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere; (xxv) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors; (xxvi) the trustee of such trust as the Authority may prescribe, when acting in that capacity; or; (xxvii) such other person as the Authority may prescribe.

2) “relevant person” under section 305(1) of the SFA, which means:
(i) An accredited investor; (ii) a corporation the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; (iii) a trustee of a trust the sole purpose of which is to hold investments and each beneficiary of which is an individual who is an accredited investor; (iv) an officer or equivalent person of the person making the offer (such person being an entity) or a spouse, parent, brother, sister, son or daughter of that officer or equivalent person; or (v) a spouse, parent, brother, sister, son or daughter of the person making the offer (such person being an individual).

3) any person who acquires the units [in a collective investment scheme] as principal if the offer is on terms that the units may only be required at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of units in a collective investment scheme, securities, securities-based derivatives contracts or other assets, and if the following condition is satisfied: (i) the offer is not accompanied by an advertisement making an offer or calling attention to the offer or intended offer; (ii) no selling or promotional expenses are paid or incurred in connection with the offer other than those incurred for administrative or professional services, or by way of commission or fee for services rendered by any of the persons specified in section 302B(1)(d)(i) to (vi) of the SFA; and (iii) no prospectus in respect of the offer has been registered by the Authority or, where a prospectus has been registered (A) the prospectus has eAccxpired pursuant to section 299 of the SFA; or (B) the person making the offer has before making the offer 1. informed the Authority by notice in writing of its intent to make the offer in reliance on the exemption under this subsection; and 2. taken reasonable steps to inform in writing the person to whom the offer is made that the offer is made in reliance on the exemption under this subsection.

4) Or otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

If you are not any of the types of persons described above, you are not authorized to enter this website and you should leave this website immediately.

2 Terms and Conditions
You acknowledge that you have read these Terms and Conditions (“Terms”) prior to accessing the website located at www.robeco.com/sg (“Website”) and you agree to be bound by the Terms.  If you do not agree to all of the Terms, you are not an authorised user and you should not use the Website. The Website is owned by Robeco Singapore Private Limited (company registration number: UEN. 201541306Z), which is licensed by the Monetary Authority of Singapore (“MAS”) pursuant to the Securities and Futures Act (Cap.289) (“SFA”) of Singapore, and is managed by Robeco Singapore Private Limited and/or its affiliates (collectively, as “Robeco”). The Website is intended for and should be accessed by institutional investors or accredited investors (as defined under Section 4A of the SFA) of Singapore.  The Website is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject the Robeco to any registration or licensing requirement within such jurisdiction.  It is your responsibility to observe all applicable laws, rules and regulations of any relevant jurisdiction. The content contained in the Website is owned by Robeco and/or its information providers and is protected by applicable copyrights, trademarks, service marks, and/or other intellectual property rights.  You may not copy, distribute, modify, post, frame or link the Website, including any text, graphics, video, audio, software code, user interface, design or logos.  You may not distribute, modify, transmit, reuse, repost, or use the content of the Website for public or commercial use, including all text, images, audio and/or video.  Robeco may terminate your access to the Website for any reason, without prior notice. Neither Robeco, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from the access of the Website.  You agree to indemnity and hold Robeco, its associates, directors, officers or employees harmless against any and all claims, losses, liability, costs and expenses arising from your use of the Website due to violation of the Terms. Robeco reserves the right to change, modify, add or remove any parts of the Terms at any time and for any reason.  The Terms shall deemed to be effective immediately upon posting. The Terms shall be governed by, and shall be construed in accordance with, the law of Singapore.

Disclaimers
The Website has not been reviewed by the MAS. Accordingly, the Website may not be accessed directly or indirectly to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, (ii) to a relevant person pursuant to Section 305(1), or any person pursuant to Section 305(2), and in accordance with the conditions specified in Section 305, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. 

Nothing in the Website constitutes tax, accounting, regulatory, legal or investment advice.  The Website is for informational purposes only and should not be construed as an offer to sell or an invitation to buy any securities or products, nor as investment advice or recommendation or for the purpose of soliciting any action in relation to Robeco’s businesses, or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer and solicitation. Any reproduction or distribution of information from the Website, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited.  By accessing to the Website, you agree to the foregoing.  

The funds referred to in the Website are for information only.  It is not a recommendation or investment advice, nor does it mean the funds is suitable for all investors.  The contents of the website is not reviewed by the MAS.  Any decision to participate in the funds should be made only after reviewing the sections regarding investment considerations, conflicts of interest, risk factors and the relevant Singapore selling restrictions.  You should consult your professional adviser if you are in doubt about the stringent restrictions applicable to the use of the Website, regulatory status of the funds, applicable regulatory protection, associated risks and suitability of the funds to your objectives.

Any decisions made based on the information contained in the Website are the sole responsibility of yours.  Any investments made or to be made shall be with your independent analyses based on your financial situation and objectives.  The investments and strategies contained in the Website may not be suitable for all investors and are not guaranteed by Robeco.  

Investment involves risks and may lose value.  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.  The Website may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies and such projection or forecast is not indicative of the future.  The information contained in the Website, including any data, projections and underlying assumptions are based upon certain assumptions, management forecasts and analysis of information available on an “as is” basis and without warranties of any kind, whether express or implied, and reflects prevailing conditions and Robeco’s views as of the date published or indicated, and maybe superseded by subsequent events or for other reasons.  The information contained in the Website are accordingly subject to change at any time without notice and Robeco are under no obligation to notify you of any of these changes.  Robeco expressly disclaims all liability for errors and omissions in the information presented in the Website and for the use or interpretation by others of information contained in the Website.

Robeco Singapore Private Limited holds a capital markets services licence for fund management issued by the MAS and is subject to certain clientele restrictions under such licence.  An investment will involve a high degree of risk, and you should consider carefully whether an investment is suitable for you.

I Disagree