24 Mar 2020
Teera Chanpongsang, portfolio manager, Fidelity Asia Fund
With over 20 years of experience investing in Asia, I have invested through both the Asian Financial Crisis in 1997-98 and the global financial crisis (GFC) in 2008. When it comes to periods of market downturn, and financial crises, each one is different and nuanced with differing causal effects. This time is different again. It is not about over-leveraging, but it is a global pandemic that we are facing. What began as an outbreak in China has now assumed a global scale. It is not financial distress, rather it is uncertainty about individual health and fear about personal wellbeing everywhere.
We are seeing sharp declines in global equities as news of global contagion unnerves investors. Going forward, the level of action that each government takes to contain a sharp rise in new cases, and its impact on the actual contagion will impact investor sentiment.
I believe Asian countries (such as Hong Kong, China, Singapore, Thailand, Taiwan) are prepared and have a high level of risk awareness which is evident in their day to day responses. Asian corporates appear to be in good shape and have very low debts on their balance sheet. Therefore, these economies are likely to recover quickly. However, the level of recovery depends on each economy’s reliance on global economic growth as well. I strongly believe that Asian countries, particularly China are now on the path to recovery. Nearly 80% of production in China has come back and is expected to be at 90% by the end of March. However, the global economy might decelerate significantly and that would have a huge impact on demand.
We should not overlook the long-term structural shifts like e-consumption - anecdotal evidence from Fidelity analysts as well as data releases in China showed that online transactions accelerated during this tough time. Consumers will be even more interested in buying life insurance and health insurance, furthering the structural penetration of insurance in China and let’s not forget the ongoing development of innovative drugs in China, which the government will certainly keep promoting.
I continue to spend most of my time in 1:1 meetings with corporates to evaluate current impact of the outbreak and my bigger concern is the expected weakness in the global economy.
I remain overweight domestic growth stories such as financials in emerging countries like India and Indonesia, which have a low penetration of financial products. I prefer AIA Group as it is the best- in-class private sector insurer with room to grow as China opens up in 2021 and the addressable market increases three-fold.
On a stock specific basis, I am overweight consumer discretionary and consumer staple sectors and underweight industrials, materials and energy sector. The demand pattern is cyclical in nature and there is no catalyst for a structural growth in demand.
In the short-term, headlines about the acceleration of new COVID-19 cases in the developed countries like the US and UK will fuel investor fear and market volatility, particularly as global markets continue to be highly correlated.
Nonetheless, I believe Asia offers long term structural growth opportunities for long-term investors. I continue to look for companies that can deliver sustainable earnings in the long-term. I do not own companies that have high levels of debt. Stock selection will be the main driver of alpha generation for investors in the long-term, while we navigate short term spikes in volatility.
Teera Chanpongsang joined Fidelity in 1994 as a research analyst. In 1998, he was appointed portfolio manager of the Fidelity Thailand Fund (SICAV), which he managed until September 2004 before moving to London to run the Fidelity Global Telecommunications Fund (SICAV). Teera relocated back to Hong Kong in 2007 to start our Emerging Asia strategy and he has managed the Fidelity Emerging Asia Fund (SICAV) since its launch in 2008. He also managed the Fidelity India Focus Fund (SICAV) from 2009 to and 2013 and has run the Fidelity Asia Fund since 2014. Prior to joining Fidelity, Teera was general manager at Chi Cha Group, Bangkok. He graduated from Chulalongkorn University, Thailand, with a Bachelor of Art (Accounting) and also holds an MBA degree from University of California, Berkeley.