Blockbuster returns don’t always come with special effects. In praise of banks, boats, and shopping malls, Co-Manager of the abrdn Asia Focus plc, Gabriel Sacks, makes a compelling case in praise of the unsung heroes of Asian investing—where the duller the business, the steadier the reward might turn out to be.
Sight and Sound is the prestigious journal of the British Film Institute. Every 10 years it draws on a poll of critics, programmers, curators, archivists and academics to produce a list of the hundred greatest movies ever made.
In the most recent rundown, published in 2022, the number-one slot went to Jeanne Dielman, 23 quai du Commerce, 1080 Bruxelles. This proved a controversial choice, to say the least, since many people consider the film extraordinarily dull.
With a running time of well over three hours, Jeanne Dielman charts a widow’s stultifying day-to-day routine of cooking, cleaning, child-raising and running errands. Lengthy, static shots and extended silences dominate.
A New Yorker analysis described the viewing experience as “intensely, maddeningly and hilariously boring”. Yet the same review lavished praise on what it dubbed a “revelatory tedium”[1].
So the general argument seems to be that dreariness, in its own strange way, can be rather wonderful. This idea has no mean merit in the world of investment, where stocks that might not set pulses racing can nonetheless bring plenty of satisfaction over the long term.
Below are three apparently uninspiring themes that may just deserve to top a poll of investors in Asian smaller companies. Each underscores the appeal of consistency and dependability in a global investment environment broadly defined by ongoing uncertainty and volatility.
- Banks
Unless they are being robbed, traditional banks are something of a benchmark for boring – especially after the explosion of fintech startups. In our view, though, conservative lenders can be a go-to source of stability for portfolios.
Indonesia’s OCBC NISP is a bank that has repeatedly demonstrated its reliability and resilience. Its majority shareholder is Singapore’s OCBC Bank, which is itself known for its cautious outlook.
OCBC NISP has emerged unscathed from several market shocks over recent decades. Events such as the Asian financial crisis, major terrorist attacks and the ups and downs of President Suharto’s 31 years in office have failed to knock it out of its ever-unruffled stride.
It is not a market leader in the accepted sense of the term, and it has not grown as rapidly as some of its peers. But we believe the quality of its assets and its inherent equanimity count for a lot, as currently reflected in a dependable dividend income stream.
- Shipping
Provided there are no storms or pirates on the horizon, transporting containers by sea is seldom regarded as uncommonly exhilarating. Yet it remains central to the functioning of international commerce.
This means fleets of ships all around the world must be maintained, repaired or refitted on a regular basis. Even against a backdrop of tariffs and trade wars, such work is still essential.
Headquartered in South Korea, HD Hyundai Marine Solution – yes, minus the S – has a global network that includes distribution centres in Europe, the US and Singapore. It is also in the process of establishing a presence in the lucrative Middle Eastern market.
We like Hyundai’s aftermarket business, given the recurring nature of its revenue. With around 50,000 purchase orders and 80,000 deliveries a year, it is a services-oriented business that – unlike shipbuilding – is an asset-light operation, generating high returns and healthy cash flow. We believe the company can continue to deliver annual revenue growth of 20%, alongside an attractive shareholder return policy.
- Shopping centres
Like High Streets before them, shopping centres are a dying breed in many Western economies. Cost-of-living issues, rising energy prices, the popularity of online retail and various other negative dynamics are all working against them.
In many Asian countries, by striking contrast, malls are still seen as extremely desirable destinations. This is particularly the case in big cities and warmer climates.
Consumers are drawn by spectacular arrays of shops, restaurants, bars, cinemas, playgrounds, gardens and other amenities. Investors are drawn by well-diversified tenant bases, scope for further development and – as is usually the case with infrastructure – the prospect of inflation-protected income.
Phoenix Mills constructs and operates malls across India, focusing in the main on state capitals and other top-tier cities. It has an excellent pipeline of future projects, which suggests it could preserve its “boring but good” status for years to come.
Worth the wait
A key aspect of investments such as these is that they demand patience. They are not intended to “shoot the lights out”. Their principal attraction lies in their unwavering steadiness.
In other words, the rewards might be neither immediate nor obvious. But they should become apparent over time.
The same might be said of Jeanne Dielman. Without wishing to spoil the plot – such as it is – I can reveal that those who are somehow able to endure 201 minutes of drudgery will ultimately find the term “deadly dull” surprisingly apt…
Gabriel Sacks is Co-Manager of abrdn Asia Focus plc.
[1] See New Yorker: “The revelatory tedium of the new ‘greatest film of all time’”, December 5 2022 – https://www.newyorker.com/culture/cultural-comment/the-revelatory-tedium-of-the-new-greatest-film-of-all-time.
