Guru watch

Francisco García Paramés, founder, Cobas Asset Management

The “engine of global growth is in Asia”, says Francisco García Paramés, the Spanish fund manager who has been one of the eurozone’s leading proponents of value investing over the past three decades. Europe is stagnant, while “moderate growth” in the US is underpinned by high public spending. Yet Asia should continue expanding at around 5% per year, thanks to China, India, and members of the Association of Southeast Asian Nations (Asean), despite a “sharp slowdown” in China’s real-estate sector.

“That both China and the other countries have been able to grow, despite these headwinds, can be explained by the strength and dynamism of their economies,” says Paramés in his most recent commentary to his investors. Over the last three decades, the world’s economic output has shifted from the West towards developing economies. Asia’s share of global GDP on a purchasing power parity basis (PPP) has increased from over 10% in 1990 to more than 30% now.

The region’s influence on the global economy should keep rising. China, India, and the Asean countries “have a population of three billion people and a per-capita income that is still very low, so the potential for growth is very high”.

Meanwhile, “progressive change in corporate governance” in Japan and South Korea is a “good sign” for investors, says Paramés. The Toyko Stock Exchange is pushing companies that trade at less than book value to take steps to improve their performance. In Seoul, “virtually all large companies have started share buyback and cancellation programmes”.

So while Paramés’ international portfolio is mostly focused on Europe, he now has around 4% in Asia (compared with 22% in the US). “It seems important to keep a close eye on what is happening” in the region, because “in the mediumterm good opportunities are bound to arise.”