Speaking at an event in Sydney yesterday, T. Rowe Price manager of Asia ex-Japan fund, Anh Lu, said that it’s important not to get “caught up in the complexity”.
Ms Lu argued that Asian companies that are able to take advantage of changing business conditions are likely to improve earnings growth.
“I think that in 2015 you will start to see a better earnings profile from the Asia ex Japan region,” she said.
Fundamentals of the Asian equity market that were once negative, such as high commodity prices, are now turning into positives.
“After three or four years of pretty bad performance many corporates are waking up to the new reality,” she said.
Businesses throughout Asia are cutting costs, changing capital structures, innovating, and finding new ways to expand markets.
Significant reforms – such as liberalising interest rates and changing tax structures – slowly being introduced by governments across Asia are positively influencing the equity market.
“Change is not easy but we think it’s making the right progress and moving in the right direction,” Ms Lu said.
“What it will eventually bring to corporate Asia is better efficiency, it should create more entrepreneurial freedom, and some of the changes should shift capital in the right direction.
“Ultimately all these things lead to better companies.
“If you have better transparency and better governance the market will want to pay a higher multiple for that,” Ms Lu said.
Moreover, Ms Lu argued that when investing in Asia – focus on the theme of change.
“We are going through a period in history where things are very dynamic, and companies are constantly having to adapt and change,” Ms Lu said.
“I think companies that don’t change won’t do well in this environment.”
Ms Lu pointed out that Asian businesses that respond to new trends, such as the emerging middle class and technological advancements, will provide greater earnings growth.
While Ms Lu does not see a rapid acceleration of growth, the general “economic picture” for most Asian economies is better than the last three years.
