Duncan Robertson

Market Outlook

Asia Outlook

Outlook

Latest Asian economic and market outlook. 

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We believe the US Dollar is still historically overvalued, even after the post-“Liberation Day” sell-off. We also see the US fiscal situation as unsustainable; the US needs to tighten its belt more than any other major economy. Meanwhile, the explosive growth in shale oil that benefited the US in the recent past is unlikely to be repeated. For all these reasons, we expect US exceptionalism to fade, resulting in a weaker trade-weighted dollar and a rotation of capital out of crowded US assets. Asian equities should be major beneficiaries of this. Foreign ownership in the region is only about 25% and valuations appear compelling: on a CAPE basis Asia trades at roughly a 40% discount to the S&P 500, the widest gap in a quarter-century.

Against a backdrop of tariff rhetoric, we have largely built the portfolio around Asian domestic demand. In India we note clean corporate balance sheets, a rebounding property cycle, rising government capex and a pro-growth RBI, all of which underpin our domestic-demand plays Lemon Tree, Aditya Birla Capital, Sunteck and Nuvama Wealth. Elsewhere we remain constructive on Indonesia, where US Dollar weakness should allow the central bank to cut rates and unwind the SRBI liquidity drain, benefiting banks (BSI, BNI) and developers (Pakuwon, Ciputra). We have also been adding to the Philippines, which is extremely cheap versus its own history. 

Two exceptions to our domestic-demand bias are the AI hardware supply chain – more than 20% of the fund sits in Chroma, SK Hynix, Asia Vital Components, Elite Material, TSMC and similar names – and a small basket of deeply discounted Hong Kong-listed shares, notably Crystal International and Stella International. We continue to expect generative AI to automate 15-40% of white-collar tasks, supporting multi-year demand for data-centre infrastructure.

Conversely, we remain underweight China as it is very unlikely to emerge from the trade war with a better deal than other Asian economies, and continues to battle a number of structural headwinds, including a deflationary economy, property sector weakness, poor demographics and excess debt.

Finally, from a risk management perspective, we have raised cash and reduced the beta of the fund, recognising that markets have moved a long way, despite macro risks remaining elevated. 

Important Information:

Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).

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