In 2016 I think we can expect to see the headline growth rate of Chinese GDP figures continue to gently slow down. But we actually think that’s a good thing, because the most important thing is the quality of GDP growth rather than the quantity. And by that I mean is the GDP being generated by sustainable domestic demand and consumption, or is it dependent on the old, fixed-asset, investment debt-fuelled model. We obviously want to see that transition towards consumption take place. The recent 13th five year plan released by the Chinese government shows that their reform plan is intact, and it’s designed to make that shift to consumption take place. Importantly China is a very broad and deep market, and we’re finding a lot of good companies for our managers to invest in – which have good business models, good management teams, and attractive valuations.
India also looks like a great opportunity in 2016. I think you can argue that – whereas China has already made the easy money, India has yet to do so – and by that I mean they’re still capable of generating high levels of economic growth from building infrastructure. They also have a demographic tailwind from a rising population. Consensus economic forecasts already show India’s economy growing faster than China’s. Prime Minister Modi seems to be doing all the right things. His government’s targets look truly impressive: 100 million new jobs, 100 million new toilets, 65 million new homes, to name but a few. So these are all causes for great optimism. Like China it’s a very broad and deep stock market that our portfolio managers are able to find lots of really good quality companies to invest in at attractive valuations.
The rest of the region is slightly less attractive than China and India. Some of the ASEAN countries like Thailand and Malaysia have some political or economic headwinds. But in general we think that Asian emerging markets should outperform non-Asian emerging markets in 2016, because of the former’s generally higher growth rates, their strong fiscal and current account surpluses, their high levels of foreign exchange reserves, and the fact that generally speaking they are commodity consumers rather than producers. But it’s really the companies in Asia that excites us rather than the macro; we have 16,000 listed companies in Asia, which is more than Europe and the US combined. With 50 analysts [based in Asia] turning over all those stones, inevitably we’re finding lots of good companies to invest in with good business models, trustworthy management teams and attractive valuations.