By Isabella Zhong
The MSCI Asia Index has experienced plenty of ups and downs but
is flat this year. Elke Schoeppl-Jost expects 2015 to continue to
be a volatile year for Asia markets, but Deutsche Asset &
Wealth Management's Asia Pacific Chief Investment Officer remains
bullish on Asian stocks; investors just have to choose carefully,
focusing on well-managed and high-quality companies while avoiding
countries with high political risk, such as Thailand and
Indonesia.
Schoeppl-Jost, who first fell in love with Asia as a student at
Beijing Cultural and Language University, has been based in Hong
Kong for the past seven years. The Austrian native was previously
CIO at BEA Union Investment before she joined Deutsche, which
manages $95 billion of assets in the Asia Pacific. Besides food,
culture and language, Schoeppl-Jost sees striking differences
between Asia and Europe also in their attitudes towards investing.
"People in Europe tend to invest into funds for a longer period of
time, whereas here, people are way more hands on with their money -
everyone's watching the index daily and punting stocks themselves,"
said Schoeppl-Jost.
Increased institutional capital and the expansion of interest
beyond traditional targets of real estate and stocks have helped
Asia markets mature in recent years. But despite the growing
appetite for bonds and alternative assets, Schoeppl-Jost thinks
2015 calls for a stock-driven investing strategy. "With lower oil
prices, I could clearly see that there could be increased interest
for equities," she says, although she declines to discuss specific
stock picks.
She sits down with Barron's Asia to discuss some markets she
feels most upbeat about:
1. The Philippines:
"The Philippines has made political changes for the better. Its
demographics are very much in its favor, and, as an outsourcing
center, it can bring back home a lot of talent to develop the
country," Schoeppl-Jost says.
"It has also been very successful with building its gambling
industry, and all of this will trickle back into domestic
consumption." For example, U.S. gambling giant Caesars
Entertainment (ticker: CZR) recently announced it is seeking a
license to build a $1 billion casino in Manila, while Melco Crown
Entertainment's ( 6883.HK) City of Dreams is slated to open later
this year.
With a median age of only 23 years, the Filipino population
stands out as one of the youngest in a greying Asia. The country is
also expected to be the fastest growing among the six largest ASEAN
countries, with the Asian Development Bank forecasting gross
domestic product growth of 6.4%.
2. South Korea:
"Korea is definitely a stock-pickers' market. It has always been
on a discount and it needs to be watched very carefully,"
Schoeppl-Jost says. "It has been looking very distressed recently,
and has been hurt by the weaker yen," which give Japanese exports a
competitive edge. And then there's the "chaebol discount" --
conglomerates that are typically family-controlled and often
shunned by investors for not being shareholder-friendly enough.
Last month, the country cut interest rates for the second time
in three months after experiencing four consecutive months of
falling exports. Schoeppl-Jost says the extent to which
accommodative monetary policy will help Korea's technology sector
very much depends on the yen's future movements. But she sees
consumer goods and tourism as clear beneficiaries of lower
borrowing costs in Korea.
3. India:
Although the Sensex has already rallied nearly 20% since Prime
Minister Narendra Modi's landslide victory in the May elections,
Schoeppl-Jost still sees opportunities in India. "Even though there
are a lot of people on the Street who say India is too expensive, I
think it is probably the market with the highest likelihood of
earnings reversions," she says.
The country's GDP growth has averaged a lackluster 4.9% the past
two years, and this cyclical weakness depressed the bottom lines of
many Indian companies. However, Modi's planned reforms are expected
to lift economic growth, and analysts forecast average earnings per
share for the Sensex to increase by 9.5% in the coming 12 months,
and by around 18% in each of the two years following that. Among
sectors, Schoeppl-Jost thinks infrastructure will outperform.
4. Macau:
China's crackdown on political corruption has rattled Macau's
gambling industry, which contributes nearly half of the special
administrative region's economic output. Casino operator Sands
China's ( 1928.HK) stock has pulled back 22% since the beginning of
the year, while Wynn Macau's stock ( 1128.HK) has fallen 20%.
However, Schoeppl-Jost sees a "longer-term story" in the gaming
enclave. Once highly dependent on high-rollers, Macau has seen a
broadening of its market, she says. "We are now coming to a stage
where wealth has been going up and ordinary people are interested
in coming for long weekends and day-time gambling." The trend will
improve the quality of Macau's GDP, which is very healthy for the
special administrative region in the long run. "It's the
sustainability that matters."
Email: isabella.zhong@barrons.com
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