Fidelity Asia – financial and tech companies drive returns
Kate Marshall | Tue 26 November 2019
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- A large part of this fund currently invests in the financial and tech sectors
- This has helped recent performance
- The manager thinks the US/China trade war could present interesting investment opportunities
Our view
Teera Chanpongsang, manager of Fidelity Asia, has lots of experience investing in Asia. He started his career at Fidelity running funds focused on a single Asian country, including Thailand and India, and has invested more broadly across the region since 2008.
We think he uses a sensible investment process, which could lead to good long-term returns for investors. He has access to plenty of research carried out by Fidelity’s wide bank of analysts that are based throughout Asia.
This fund doesn’t feature on the Wealth 50 list of our favourite funds. We currently have more conviction in other managers investing in Asia, who have built stronger track records over a prolonged period.
US/China trade war – not all bad?
The manager recently gave us his views on the trade tussle between the US and China. While there's no doubt it's having some impact on business and investor confidence, he thinks it's created some positive investment opportunities too. For example, in a bid to counteract the negative impact of a trade war, the Chinese government has relaxed restrictions on companies looking to expand in China.
Take AIA Group, one of the fund's biggest investments. According to the manager it's currently the number one insurance group in Hong Kong and Thailand, but it isn't as big in the Chinese market. It's presence in mainland China has been limited because of restrictions on foreign insurers, but these are being relaxed. This provides the company an opportunity to grow and take market share in China.
AIA is listed in Hong Kong and companies based there currently make up 10.9% of the fund, while 38.3% of the fund is invested in China.
Financials and tech boosts returns
A large part of the fund is currently invested in the technology and financials sectors (20.8% and 30.9%, respectively). Over the past year the fund's grown 19.6%* compared with 12.6% for the broader Asian stock market, and our analysis shows sector positioning has boosted performance. Past performance isn't a guide to future performance though.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Oct 14 -
Oct 15 |
Oct 15 -
Oct 16 |
Oct 16 -
Oct 17 |
Oct 17 -
Oct 18 |
Oct 18 -
Oct 19 | |
| Fidelity Asia | 1.7% | 40.1% | 22.4% | -10.7% | 19.6% |
| FTSE Asia Pacific ex Japan | -6.8% | 37.5% | 16.1% | -8.4% | 12.6% |
Past performance is not a guide to the future. Source: *Lipper IM to 31/10/2019
Taiwan Semiconductor Manufacturing, which makes components for tech products such as smartphones, is currently one of the fund's main investments in the technology sector. It's the world's main supplier of semiconductors for computing, communication and consumer electronics, and could benefit from other emerging trends, such as the use of artificial intelligence.
In financials, the manager invests in a range of banks. He's highly selective about the banks he invests in though – in his view, many Asian banks are struggling to grow, have high levels of debt, and have too many NPLs (non-performing loans – loans that are unlikely to be paid back). So he focuses on those with lower debts, fewer NPLs and a clear strategy, with the support of a good management team. Current investments include Bank Central Asia, based in Indonesia, and India's HDFC Bank.
Overall, the fund's performed well and returned 103.2% since Chanpongsang took it over in January 2014 to 31 October 2019. At the same time the Asian market's grown 69.9%. However, past performance is not a guide to the future and could be volatile at times, especially as the fund invests in emerging markets, which are higher-risk than developed markets.