Angus Tulloch, manager of First State Asia Pacific Leaders
"Asia Pacific ex-Japan markets rose strongly over the first quarter, outperforming world markets. Investor sentiment improved as fears receded about the debt crisis in the eurozone and as there were signs that the US economy may be turning the corner."
"For all the optimism, we remain concerned that markets are still held up by accommodative monetary policy in the West and that the eventual removal of this stimulus will bring a reality-check in Asia and elsewhere."
"Politics in both India and China appear increasingly fragile. In India, the governing Congress Party struggled in recent state elections. Historically it has responded by throwing money at the electorate, but with weak government finances this may prove difficult."
"In China, Bo Xilai’s dismissal as Chongqing Communist Party secretary is a reminder that we ought not to take Chinese political stability for granted."
"Interestingly in both India and China the concern appears to have shifted from inflation to growth, as evidenced by recent monetary easing."
"In China we continue to question the widely held belief that the government is in control and can engineer a pain-free slowdown in the economy and would not be surprised to see turbulence down the line. Longer term we remain more positive, and continue to focus on the theme of domestic consumption, which we believe has bright prospects."
"With the slowdown resulting from debt levels in the West countered by inflationary government policies, the outlook for the region still depends largely on outside influences."
"With such opposing forces, preservation of capital should remain the focus and hence our portfolio remains very defensively positioned, focusing on companies with pricing power, strong sustainable cash flows and growing dividend yields."
The conservative approach has paid off for Tulloch over the years. Data from FE Analytics
shows his First State Asia Pacific Leaders fund has returned 75 per cent over the last five years compared with 41 per cent from the average Asia Pacific ex Japan portfolio.
, manager of First State Greater China Growth
"2012 will be an important year in Chinese politics, with a change of leadership in November. Although there have been indications of infighting suggested by the sacking of Bo Xilai, we do not expect any significant change in policy as a result."
"The government is likely to remain focused on boosting consumption, reducing the reliance on investment and maintaining social stability."
"However, the health of the Chinese banking sector continues to be a concern following excessive government-directed lending to boost the economy after the global financial crisis."
"We expect this issue will continue to be a gradual drag on the market rather than coming to a head given that banks and corporate borrowers are both owned by the state."
"At a company level we will continue to pay close attention to issues such as financial strength, corporate governance and management awareness of risk. As always, we remain focused on valuations, especially when it comes to popular sectors of the market such as consumer stocks. We are also concerned about earnings uncertainty arising from a slowing economy in China."
"In our portfolios we are cautiously positioned, preferring companies exposed to consumption rather than investment and focused on those which are cash-generative and have strong management."
Our data shows Lau’s First State Greater China Growth fund is the best performing in IMA China/Greater China over five years. It has returned 78 per cent over the period compared with 41 per cent from the average fund in the sector.
Jonathan Asante, manager of First State Global Emerging Markets Leaders
"Despite rising markets there are still many risks on the horizon and as a result we remain cautious."
"A visit to Asia has made us concerned that 'private banking' in the region could be the next banana skin for global banks looking for new sources of revenue. The drive to increase income from fees could potentially lead to a mis-selling of products."
"We question if the Chinese banking system – at the government’s orders – really can or should channel depositors’ money towards capital spending in the way it has done in the last 10 years."
"A continuation of Chinese investment and capital expenditure growth is questionable even if Chinese consumers continue to be better off in the medium-term."
"While we have little direct exposure to mining companies in our global emerging market funds, we have to recognise that commodity-producing countries like Brazil and South Africa are at risk because their governments are likely to base spending plans on the expectation of high commodity prices."
"We continue to be sceptical that developed world authorities can solve the excess debt situation with more debt. A world of slow growth and rising costs strikes us as a difficult one in which to consistently raise profits and cash flows, as many businesses have in recent years."
"We believe that companies with strong brands often stand the best chance under such circumstances. In emerging markets, many of these companies look fully valued whereas many global multinationals with large and growing GEM businesses remain acceptably priced."
With returns of 83 per cent over the last five years, the performance of the First State Global Emerging Markets Leaders fund is matched only by Aberdeen’s Emerging Market