Tilney Smith & Williamson’s MPS: Positive on Asian EMs despite market volatility

James Burns, co-manager of the Smith & Williamson Investment Management MPS, comments:

“US equities have had a torrid time of late, with the S&P now officially in ‘correction’ territory, having dropped around 10% since its high on 3rd January.

“Geopolitical developments have clearly had a role to play in the recent turmoil in markets, but in our view we also think there is an element of investors realising that there is excess in the US market.

“What has gone up in the last few years can also come back down.

“Despite rising inflation and banks embarking on a rate hike cycle, in our view equities are still the place to be for 2022 and we remain overweight the asset class in the majority of our portfolios. But we believe it is time for investors to look again at cheaper markets.

“While we have yet to go overweight in emerging markets as we want to see the Asian EMs continue to perform well before allocating further, we feel that some individual country plays may be the way to access the region’s growth potential.

“In our two growth portfolios we recently added to our allocation in China by purchasing more shares in the Fidelity China Special Situations investment company. Run by Dale Nicholls, the strategy focuses on companies with long-term growth prospects listed in China or with significant interests in China.

“One of the closed-ended funds we hold in our most growth-focused portfolio is Utilico Emerging Markets. Currently trading at a 10% discount to NAV, the investment company run by Charles Jillings has easily outperformed its benchmark over the past year and has extensive exposure in India, China and the Philippines.

“In these growth-focused portfolios we also hold Goldman Sachs India Equity, a small and mid-cap bias fund managed by Hiren Dasani.”

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