WHAT HAS HAPPENED THIS YEAR AND WHY ARE YOU POSITIVE FOR 2014?
Emerging Asian markets made a strong start at the beginning of 2013, but suffered in the second half given the changing risk-on/risk-off environment. This was driven by fears over Chinese growth, general policy inertia in the region and events in the US.
Going forward, though, there are signs of progress. For instance, economic activity in China is stabilising and its leaders are likely to implement market friendly reforms over the coming years. Meanwhile, India and Indonesia, which have been the main culprits of policy inertia, have started to make necessary policy decisions to tackle their troubled current and fiscal account deficits. Moreover, the market has discounted some of the mixed economic data from the region. Valuations are looking attractive, particularly for high-quality companies that underperformed during the indiscriminate sell-off in the market.
SO HAS YOUR LONG-TERM OUTLOOK CHANGED?
I continue to believe that emerging Asia’s long-term outlook is healthy. The recent macroeconomic environment has been challenging, but volatility has largely been driven by a mass exodus of investors who feared another 1997-like collapse. These comparisons were made due to rising current account deficits in India and Indonesia and weakening currencies. However, I believe these judgements were too hasty. As opposed to 1997, emerging Asian economies generally have bigger foreign reserve surpluses and debt is held locally, not by foreigners. There is also lower leverage in the system at both the public and corporate level. Also, the underlying fundamentals behind emerging Asian economies are strong. As such, favourable demographics, rising incomes, increased consumer spending and the associated changes in lifestyles will likely continue to drive these economies and their markets over the long-term.
Read more in the current Press Release:
Fidelity Funds Emerging Asia Fund Perspectives
