Asia’s recovery provides hope for the UK

BY HOOK or by crook, China is attempting to put the coronavirus crisis behind it.

Mario Solari, portfolio manager of Genesis Emerging Markets, says China’s emergence from lockdown provides hope for UK investors.

He says: ‘Buoyed by containment success, many companies we have spoken to in China are optimistic about a V-shaped recovery – especially in the second half of this year.’

Yet he adds a word of caution. ‘A key next question is the degree to which falling global demand for manufactured exports will undermine hopes for a rapid economic rebound in countries such as China, Korea and Taiwan.’

Ryan Hughes is head of active portfolios at wealth manager AJ Bell. He says that investment funds with exposure to Asia provide investors with opportunity.

He explains: ‘Asian countries have handled the crisis reasonably well, helped by either strict lockdowns or natural social distancing via low population densities. One of the interesting features about Asian companies is that management tends to be relatively prudent. As a result, there are much lower levels of debt at a corporate level.

‘So Asian companies could come out of this crisis strongly and should also retain the ability to pay dividends, unlike many of their Western counterparts.’

Hughes recommends two funds for those interested in investing in Asia. The first is Jupiter Asian Income which he describes as ‘relatively defensive’ as it invests in companies with strong balance sheets across Asia and Australia. Its largest holdings are in South Korea’s Samsung Electronics and Taiwan Semiconductor – corporate linchpins of two countries that have been lauded for their handling of the coronavirus crisis. The fund has an attractive dividend, equivalent to 3.7 per cent a year.

Hughes also likes investment trust Schroder Asia Pacific. It has a dividend equivalent to 2.4 per cent a year.

Its two biggest holdings are Chinese online marketplace giant Alibaba – eight per cent of the trust – and Samsung.