New research into Asian equity investment strategies has found there is little clear evidence of any sustained link between high Asian growth rates and share market performance.
Morningstar's Emerging Markets and Asian Equities Sector Wrap-Up surveyed 18 Asian and emerging markets equities investment strategies, looking at which styles were particularly successful.
The report, citing China, says contrary to fund managers' expectation, over the medium term the country's equities market has actually lagged behind those of the United States, Europe and the United Kingdom. This is despite swathes of the global economy having to endure severe austerity measures and anaemic growth.
They speculate that one reason behind this may be the fact that equity markets have already priced in future growth expectations.
Morningstar senior researcher and report author Mark Laidlaw said the findings are almost counter-intuitive: "There seems to be a disconnect between what is driving the economy and the equities markets," he said.
The report states that funds should not necessarily limit themselves to equities, and should diversify into other instruments. In particular, they should look at Asian and emerging market debt, which is becoming an increasingly appealing proposition, as countries move from junk to investment grade status.
This form of investing can offer similar returns as equitie but without the same volatility, the report stated.
More broadly, Mr Laidlaw said Asian equities still offer an attractive investment strategy to fund managers in the long term.
"Asian equities markets can, in the short term, be driven by sentiment," he said.
"In the long term, the fundamentals [in Asia] look more attractive to investors, with a stronger fiscal position and demographics than much of the developed world."
