Investing in Asia is becoming simpler, and Asian small-cap stocks present a real and untapped opportunity for Australian investors, says Acorn Capital.
Asian small-caps have outperformed the Australian market by 2.8 per cent a year over the past 10 years, said Acorn Capital head of research Paul Quah.
Mr Quah pointed out that Asian small-caps have also outperformed the Australian small-cap market by 7.0 per cent a year over the past 10 years.
“Many of the obstacles that investors believe stop them from investing in Asia are easy to overcome and, in our view, the opportunities that await them there are definitely worth the effort,” said Mr Quah.
“Despite the concerns some investors have about the transparency and corporate governance in the region, we have generally found the standard is high and improving.”
Mr Quah said the opportunity set within the Asian small-cap space is large, with over 5,000 companies across 10 Asian markets.
“Unlike their larger Asian counterparts, Asian small-caps allow company managers to position for new growth opportunities, whether it be locally or internationally, without the constraints of government ownership ties,” he said.
Moreover, Mr Quah noted that the opportunities within the space are not usually well known, which is a positive for investors.
“An advantage of this anonymity is that the growth of Asian small-cap investment opportunities is not already ‘priced in’.
“This is borne out by the lack of professional analyst coverage or institutional shareholdings in these companies – something Australian investors are able to benefit from,” said Mr Quah.