The FTSE 100 is littered with multinational companies that derive a large proportion of their earnings from outside of the UK, in areas such as the US, Europe and more importantly the emerging markets such as those in the Asia Pacific region.
Nearly 60 per cent of FTSE 100 revenues are now derived from outside of Europe.
Although investors can reduce the risk to themselves by allocating their money to collective portfolios such as trusts and open-ended funds, a number of the more adventurous type prefer to take their chances going it alone.
For such investors, FE Trustnet highlights four stocks that derive a significant portion of their earnings from Asia.
Standard Chartered
Richard Hunter, head of equities at Hargreaves Lansdown, says one of the best examples of a UK company with a high exposure to Asia is the banking group Standard Chartered.
"Standard Chartered is one of the first names that comes to mind. It gets around 90 per cent of its earnings from Asia," he said.
"It is very established in the region and is basically a local brand, because it is trusted. The share price is £15.36 and it has a dividend yield of 3.2 per cent," he added.
Shareholders in Standard Chartered have not seen much capital appreciation over recent years. The share price of the £39bn multi-national finance and banking company has underperformed against the FTSE 100 over one, three and five years.
Over three years it has made 4.69 per cent while the general market has returned closer to 50 per cent.
Performance of stock vs index over 3yrs
Source: FE Analytics
Graham Toone (pictured), head of research at AFH Wealth Management, says he likes stocks that can offer him a higher yield than Standard Chartered.
"Standard Chartered isn’t the type of stock we buy," he commented.
"Our clients have been more interested in income-producing blue chip equities."
"The yield isn’t too attractive and so I would class it more as a growth stock. I think at £15 it is reasonable value: not cheap, but not expensive either."
Nevertheless, there are more than 80 IMA funds that count it as a top-10 holding. These are predominantly UK-focused portfolios, but the five crown-rated Aberdeen Asia Pacific fund also counts the bank among its top bets.
HSBC
Hunter says that HSBC is in a similar mould to Standard Chartered, as it has an equally large presence in Asia.
HSBC has a market cap of roughly £141bn, making it the UK’s second-largest company, just behind energy giant Royal Dutch Shell.
The bank has around one-quarter of its operations in the Asia Pacific region.
The share price is £7.29 and it regularly crops up in equity income portfolios due to its dividend yield of 4.3 per cent.
There are 164 IMA funds that count HSBC as a top-10 holding, including Artemis Income, BlackRock UK Special Situations, Trojan Income, Aberdeen Asia Pacific & Japan.
Toone is fan of HSBC, in part due to the good relationship it has with its shareholders.
"HSBC is a stock we are relatively happy with," he said. "It has been on our buy-list for some time as it is offering an attractive dividend yield. The prospective yield is close to 4.6 per cent, which is promising."
"The price is at the mid to upper trading range. Our graphs go back a while and we can see the price has been above £9, so it is in mid-range, but because of the dividend support it isn’t a cheap stock."
HSBC has performed well as banking stocks have come back into favour in recent times. It has returned 51.51 per cent over the last year, for example.
Performance of stock over 1yr
Source: FE Analytics
Prudential
"Prudential is a company looking to benefit from the emerging middle class in the Asia Pacific region," Hunter said.
Prudential is a FTSE 100 multinational life insurance company, with a market cap of £29bn. It owns a number of financial businesses such as M&G Asset Management. Prudential's largest arm is Prudential Asian Corporation.
It is based in Hong Kong and is the largest life insurer in Asia.
Over three years, the stock has risen by 147.49 per cent while the FTSE 100 has made 47.18 per cent.
Performance of stock vs index over 3yrs
Source: FE Analytics
Despite its performance, Toone says it is a stock he is steering clear of.
"The stock price has just gone up a cliff wall," he said. "It is up towards £11.55 and so it is well above its usual trading range."
"The forecasted dividend is 30p, so roughly 2.5 per cent, which isn’t particularly attractive so it isn’t a stock we would hold."
There are 107 funds in the IMA universe that count the blue chip as a top-10 holding.
These include FE Alpha Manager Nigel Thomas’s AXA Framlington UK Select Opportunities fund and Jupiter Financial Opportunities, which is headed up by FE Alpha Manager Guy de Blonay.
Burberry
Hunter is a fan of Burberry because he says it gives shareholders exposure to the growing Asian consumer story.
"Burberry is an interesting one because it isn’t just benefiting from opening stores in the region, but its earnings are benefiting from Japanese and Chinese tourists coming to Europe and buying products from their stores," Hunter said.
The FTSE 100-listed luxury fashion house has a market cap of £6.6bn. Over 10 years, Burberry has returned 671.08 per cent.
Performance of stock over 10yrs
Source: FE Analytics
However, Toone is not a fan of the stock, due to its low dividend yield and the fact it is now looking expensive.
"The price is around £15, which is the highest it has ever been, so it is right at the top of its trading range," he said.
"The prospective dividend is 29p, which equates to around a 2 per cent yield. Again, not a stock we would hold."
There are only three funds in the IMA universe that hold Burberry in their top-10.
