Markets are facing many unknowns and potential headwinds this year, with uncertainty around inflation rates and central banks’ next rate moves; a record number of elections being held globally, which could result in unexpected policy changes, greater trade restrictions and escalating geopolitical tensions; and ongoing conflicts in Ukraine and the Middle East.
Periods like this show how difficult it can be to make macro forecasts, and why diversification can be so important for investors.
Considering the macro environment
In our Asian Equity Income strategy, we take into consideration the macro environment, as this allows us to identify the countries and sectors that we think are most attractive and those that we would prefer to avoid. We consider factors including geopolitics and local politics, demographics and business environments, as well as trends that can be beneficial, or detrimental, to certain sectors, such as artificial intelligence.
Once we have identified the countries and sectors that we are comfortable investing in, within those areas, we seek out companies that have high barriers to entry, strong balance sheets, good governance and management teams, and an ability to pay out, and grow, dividends.
Broad exposure across the investment universe
Our investment process results in a highly diversified portfolio of quality income companies, across the Asia Pacific (ex Japan) region, based in both developed and emerging markets. We have broad exposure across a wide range of sectors, including technology, commodities, gold mining, consumer, financials and property, as well as single holdings in areas like defence and utilities.
Through our positioning, we are not taking some kind of “bet” on there being a particular election outcome, or on interest rates cuts being implemented by a certain central bank, for example. Instead, given our diversified exposure, we believe that our portfolio should be well positioned across a range of possible scenarios.
Global and regional revenue exposure
Within our strategy, our revenue exposure is diversified across countries and regions, which could help to mitigate some of the geopolitical risk and election uncertainty.
Our global exposure includes positions in technology companies like Hon Hai Precision, which is the world’s largest electronics manufacturer, with businesses spanning from smartphones to AI data centres; and MediaTek, which is the top provider of smartphone chips globally by volume. We believe that our technology holdings should remain relatively resilient, as they are highly adaptable and continue to generate revenue from across the globe. We also have exposure to sectors like commodities, including miners BHP and Newmont, which have solid balance sheets and offer attractive dividend yields; as well as having financials exposure, including global banks like Macquarie.
At the same time, we invest in several companies that generate local revenues and that we view as being relatively insulated from the global economy, or which play on a theme of “remoteness”. These include positions like Power Grid, an Indian electricity transmission company, which should benefit from India’s ongoing development; and Bank Rakyat in Indonesia, which specialises in microlending, providing services to customers that live very remotely with no alternative safe financing options.
Revenue exposure – Jupiter Asian Equity Income strategy
Reducing interest rate risks
We also have diversified exposure in terms of interest rate risk. Some of our positions, including banks (e.g. DBS Group and HSBC) and insurance companies (e.g. Suncorp), have business models that should continue to benefit from higher rates, while other names such as those in the tech sector tend to prefer lower rates.
Gold as a hedge
Elsewhere, we hold a position in the world’s largest gold miner, Newmont, which we view as a kind of hedge against uncertainty, and which has recently benefitted from record-high gold prices.
We also have exposure to ST Engineering, which should benefit from increased government spending on defence if geopolitical tensions do rise further. We like the company due to its defence and Smart City divisions, as well as its aircraft MRO (maintenance, repair & overhaul) business.
High conviction portfolio
We believe that our highly diversified portfolio should be well positioned for a range of macroeconomic scenarios, and we continue to have high conviction in each of the quality income companies that we hold. While we recognise that the next leg of this economic cycle could be more challenging, we still expect to see growth in earnings and dividends coming from a good number of companies held in the strategy. Given our focus on highly liquid companies, if new information or developments lead us to change our minds, we also have the ability to easily and quickly adjust our positioning.
Holding examples are for illustrative purposes only and are not a recommendation to buy or sell.
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Important information
This document is intended for investment professionals* and is not for the use or benefit of other persons, including retail investors, except in Hong Kong. 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. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Holding examples are for illustrative purposes only and are not a recommendation to buy or sell. 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. For investors in Hong Kong: Issued by Jupiter Asset Management (Hong Kong) Limited (JAM HK) and has not been reviewed by the Securities and Futures Commission. No part of this document may be reproduced in any manner without the prior permission of JAM/JAMI/JAM HK.
*In Hong Kong, investment professionals refer to Professional Investors as defined under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) and in Singapore, Institutional Investors as defined under Section 304 of the Securities and Futures Act, Chapter 289 of Singapore. 427
The value of active minds – independent thinking: A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Important Information: This document is intended for investment professionals* and is not for the use or benefit of other persons, including retail investors. 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. 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/JAM HK.
*In Hong Kong, investment professionals refer to Professional Investors as defined under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).and in Singapore, Institutional Investors as defined under Section 304 of the Securities and Futures Act, Chapter 289 of Singapore.
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