Four Asian countries that we like and one we avoid

We’ve been focused on Asia as investors for a combined 50 years. Over that time, we have found an abundance of world-class businesses in both developed and developing markets.

As top down stock pickers, we analyse the macro environment, as this allows us to identify countries and sectors that we think are most attractive and those that that should be avoided. We consider geopolitics and local politics, demographics and business environments, as well as trends that can be beneficial, or detrimental, to certain sectors.

At the moment we think the best opportunities for investors in the Asia Pacific (ex-Japan) region are in four countries:  Australia, India, Singapore and Taiwan.

Often overlooked

We see Australia as the most attractive developed market in the region, and arguably, the world. Its population growth rate is one of the highest in the world given a combination of migration and natural increase. Australia is a land of oligopolies – in many sectors you will find a small number of very strong companies with a very high combined market share and that are very well managed.

We think the outlook for Australia remains very positive, yet we believe it is often overlooked -- as is Singapore -- and underrepresented in investment portfolios. Many investors wrongly dismiss Australia as a commodity dependent economy, but we ``use’’  the country to provide  variety to our investments. We have exposure to eight different sectors (packaging, mining, property, diversified financials, insurance, toll roads, energy and retail) which shows the diversity of the Australian market.

Youthful

We are very selective among less developed markets, and we think India is the most attractive emerging market in Asia, and probably the world. India trades at a premium to the rest of Asia and other emerging markets; we believe that is deserved, though we are mindful that it is important to be selective about which companies to hold there.

India is a democracy of course and its economy and stock market are dominated by private sector companies; it has a young and growing population; and historically there has been high correlation between its GDP growth and equity market returns.

Global business centre

Singapore Prime Minister Lawrence Wong said the country’s economy performed better than expected in 2024, building a strong foundation for the city-state to manage a more complex international environment this year. Singapore has one of the highest GDP per capita in Asia, making it possibly the region’s most developed economy. It has a stable political system, and a progressive, well-functioning legal and regulatory framework, which is transparent and business friendly. It is home to a range of well-managed companies with strong corporate governance.

From a geopolitical point of view, Singapore is well positioned too, as it enjoys good relations with most of the world. Singapore is increasingly becoming the preferred location in Asia for global businesses and functions as a gateway to Southeast Asia, offering exposure to large, growing emerging markets in the region like Malaysia, Thailand and the Philippines.

Critical suppliers

Taiwan's equity market was the best-performing major Asian market in 2024. . The economy is expected to see growth this year, boosted by its semiconductor companies amid robust demand for AI-related hardware and applications. TSMC, the world's largest contract chip maker, and  Hon Hai, the world's largest contract electronics maker, are two prominent Taiwanese tech companies.

As we have recently seen, there may be short-term bumps along the way, but we think Taiwan will benefit from increased spending on AI over the long term. We are confident that capex will increase because of the widespread application promised by AI to reduce costs for companies in many sectors. Asian companies have critical importance in the AI supply chain, and we believe they are trading at attractive valuations.

One we avoid

We don’t invest in mainland China. In our view, the country’s domestic political and economic system means that economic growth does not translate to earnings growth for Chinese corporates. There are considerable geopolitical risks, in our view, including additional tariffs from the Trump administration. We also believe that the state of the economy at the moment and the property sector in particular makes it difficult for investors. Additionally, China has serious demographic challenges over the longer term.

We have become more cautious recently about South Korea. December was a calamitous month, with a tragic plane crash and an unexpected declaration of martial law that triggered political upheaval. We don’t like political instability, and we hope South Korea’s will be temporary.

We are feeling reasonably positive about the prospects this year, and would expect to see earnings and dividend growth in the Asia Pacific region. We think the best opportunities for investors will be in Australia, India, Singapore and Taiwan.

Strategy risks for Jupiter Asian Equity Income IRL:

• Geographic concentration risk - a fall in the Asia Pacific markets may have a significant impact on the value of the strategy because it primarily invests in these markets.
• Company shares (i.e. equities) risk - the value of Company shares and similar investments may go down as well as up in response to the performance of individual companies and can be affected by daily stock market movements and general market conditions.
• REITs risk - REITs are investment vehicles that invest in real estate, which are subject to risks associated with direct property ownership.
• Stock Connect risk - Stock Connect is governed by regulations which are subject to change. Trading limitations and restrictions on foreign ownership may constrain the strategy's ability to pursue its investment strategy.
• Concentration risk (number of investments) - the strategy may at times hold a smaller number of investments, and therefore a fall in the value of a single investment may have a greater impact on the strategy’s value than if it held a larger number of investments.
• Currency risk - the strategy is denominated in USD but holds assets denominated in other currencies.  The value of your shares may rise and fall as a result of exchange rate movements.
• Emerging markets risk - less developed countries may face more political, economic or structural challenges than developed countries.
• Liquidity risk - some investments may become hard to value or sell at a desired time and price. In extreme circumstances this may affect the strategy’s ability to meet redemption requests upon demand.
• Derivative risk - the strategy may use derivatives (i.e. financial contracts whose value is linked to the expected price movements of an underlying investment) with the aim of reducing the overall costs and/or risks of the strategy.
• Capital erosion risk - all or part of the share class charges may be taken from capital. Should there not be sufficient capital growth in the strategy this may cause capital erosion.

Important information

This is a marketing communication. This document is intended for investment professionals and is not for the use or benefit of other persons. This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Company or holding examples are for illustrative purposes only and are not a recommendation to buy or sell. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (JAMI), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier. No part of this document may be reproduced in any manner without the prior permission of JAM/JAMI.