Fidelity Investment Managers 2011 Market Outlook - Asia Pacific

  • Continue to see strong growth and balance sheet opportunities in Asia
  • More money likely to flow to Asia and Asian equities with authorities implementing control measures
  • Rising demand within Asia likely to lead to good performance of domestic stocks
  • Consumer theme will remain robust in Asia Pacific


Hong Kong, 9 December 2010:  Strong economic growth and healthy government, corporate and family balance sheets across Asia Pacific will continue to create solid opportunities for investors in 2011, said Catherine Yeung, Fidelity Investment Managers’ Investment Director today.

“Asian markets will remain attractive for investors. The strong rise of domestic consumers within Asia as well as continued investment spending across the region will present good investment opportunities for investors in 2011. Authorities around the region are also moving away from being dependent on exports which will help boost domestic stocks,” she said.  “The structural story in Asia remains robust with government, corporate and family balance sheets very healthy; a different story to many Western economies.” 

“I expect foreign fund flows into the region to resume their upward trend which dipped this year because of market uncertainty. An easing of market uncertainty along with authorities’ capital control measures should go some way to drawing capital back into the region. Whilst we could still see some market volatility in 2011 and another fall off in exports and GDP, the underlying growth remains viable and strong, and there are a number of opportunities in the market investors should try to tap into.”

With respect to emerging markets generally:

Teera Chanpongsang, Portfolio Manager for Fidelity Funds - India Focus Fund and Fidelity Funds - Emerging Asia Fund said,

“Economies in emerging Asia are able to generate strong real GDP growth, driven by underlying structural growth trends such as a large labour force, growing domestic consumption and increased infrastructure spending. These provide compelling investment opportunities and should lead to strong earnings growth in coming years. The robust growth in industrial production in recent past has been eroding excess capacity quickly and I expect more greenfield and brownfield expansions”

Portfolio Manager for Fidelity Funds - South East Asia Fund, Allan Liu commented,

“The global economy continues to face significant challenges presented by the weakness in advanced economies of the Euro zone and the US and growing trade disputes particularly between China and the US. However, the South East Asia region with its generally healthy financial systems and solid fundamentals remains attractive. Domestic demand is robust, supported by increasing affluence, low debt levels and high savings rates, all of which are likely to support a multi-year growth cycle.”

Portfolio Manager for Fidelity Funds - EMEA Fund, Nick Price commented,

“The secular drivers of emerging markets remains intact: attractive demographics, competitive advantages from low labour costs, an abundance of natural resources, increasing prosperity, productivity gains and sound fiscal management.  These are especially attractive in comparison to the developed world, which is faced with fiscal deficits, imbalances brought on by quantitative easing and a deleveraging consumer.  As a result, emerging market stocks have rerated in 2010 but, at this stage, I do not yet subscribe to the idea of an emerging market bubble.  I continue to find attractive opportunities at reasonable valuations.  Regardless of any near term volatility in equity markets, I remain extremely positive over the long term.”

With respect to the outlook for China:

Anthony Bolton, President, Investment, said,

“During the last few weeks the global bull market appears to have resumed. Emerging markets like China have benefited from the liquidity being created in the developed world. The Chinese economy has not been slowing down as fast as earlier expected and this would probably now happen in 2011. However, I continue to believe that the growth rate in China would still be very attractive, relative to the growth rates being seen in the developed world.”

Martha Wang, Portfolio Manager for Fidelity Funds - China Focus Fund said,

“2011 is going to be an interesting year for China as it continues to pursue structural reform to ensure economic growth. The focus will continue to be quality of growth versus quantity.  As outlined in the preliminary twelfth five year plan, Chinese government’s development plans are expected to centre around pro consumption policy to continuously stimulate domestic consumption, industrial upgrade with creation of new sectors such as alternative energy, environmentally friendlier chemicals and materials, and industries focused on improving income distribution in a way that will bring harmony to society.  In terms of pro consumption policies, the public spending on healthcare and social security are expected to rise to support increase in disposable income. RMB appreciation and wage growth will continue to be growth catalysts, boosting domestic demand and household income.”

Stephen Ma, Portfolio Manager for Fidelity Funds - China Opportunities Fund said,

“In 2011, China is likely to focus its efforts on creating new sectors such as alternative energy, chemicals, materials, and industries focused on improving income distribution in a way that will bring harmony to society. The recent direction of policy indicates that the government is expected to continue to mould China’s economy from an export/investment-driven model to a consumption-driven one, with particular emphasis on reducing reliance on reassembly-based export industries. The long-term themes, such as domestic consumption growth, industry consolidation and upgrades and the development of inland regions, will continue to play a central role in China’s next phase of development. The appreciation of the renminbi and wage growth will continue to be growth catalysts, boosting domestic demand and household income.”

Trevor Greetham, Director of Asset Allocation and Portfolio Manager of Fidelity Funds - Multi-Asset Navigator Fund for Fidelity Investment Managers said,

“2010 can be defined in terms of two significant influences on markets: the eurozone sovereign debt crisis and the authorities’ response to slowing developed market growth. For 2011, emerging markets will continue to decouple from the developed world as domestic demand and competitive exchange rates shelter their economies from the dearth of growth still plaguing the west. Commodities prices will continue to rise, posing challenges for monetary policy. Meanwhile, in the developed world, we need growth to come through more strongly for equities to maintain the momentum seen since 2009.”

“Inflation is not a tangible concern for developed economies. US Core CPI, excluding volatile food and energy prices, is at its lowest level on record – at least since the 1950s. Policymakers are likely to prefer the prospect of dealing with inflation over the medium term using traditional policy tools rather than having to manage a deflationary spiral brought on by weak economic growth in the near term. Even so, rising commodity prices linked to emerging market strength could create political opposition for central banks that print money. In contrast, I expect emerging market authorities to continue to tighten their monetary policies. Their growth was not credit-constrained and spare capacity is scarce. Further US dollar weakness associated with QE2 will also provide stimulus to these economies at a time when inflationary pressures are already mounting.“

“With the global economic cycle likely to remain short and asset prices volatile, it will be important to maintain a well-diversified portfolio in 2011 – and to be flexible in terms of asset allocation, taking advantage of the tactical opportunities that will undoubtedly arise as policy actions announced towards the end of 2010 begin to take effect, for good or for ill.”

When asked about fixed income for 2011, Gregor Carle, Investment Director said,

“If we look globally, there will be a lot of uncertainty and volatility in 2011.  But the two themes for the region will be how Asia distances itself from some of the woes which are impacting the Western markets, and how China manages its growth plan from here forward which is going to be slower than what the market has expected before.”

“Investors also need to have a more realistic expectation on their returns throughout 2011. Investors will likely continue to see value in investment-grade corporate and high yield bonds as they continue to hunt for yield in a low interest rate environment. Everyone will be focused on the signs of a consistent recovery in weaker economies as signs of further weakness will have the potential to impact valuations - particularly in the higher risk asset classes. Finally, I think inflation will be pretty benign throughout 2011 but towards the end of the year, there’s certainly more likelihood that investors will be focused on how those inflationary elements are coming through, potentially, as a result of the amount of the stimulus that we’ve seen.”

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ABOUT FIDELITY INVESTMENT MANAGERS

Fidelity Investment Managers is an affiliate but separate company to Fidelity Investments and provides investment products and services to individuals and institutional investors outside of the Americas. Fidelity has been in Asia for 40 years with offices in Japan, Korea, Australia, Hong Kong, Taiwan, Singapore and China. Fidelity manages US$231.6billion Assets Under Management (as at 30 September 2010), has over 6 million customer holdings and manages 756 funds. Fidelity has one of the largest proprietary research teams in the world, providing insights into around 98% of the world's stock markets (as measured by the Morgan Stanley Capital International World Index, 4 June 2010).

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