What the best ideas in Asia Pacific income investing look like to us

As Asian equity income investors, our approach is to seek to maximise returns through a focussed portfolio of what we call ``quality income’’ stocks.

We look for companies that can capture growth in the region, though many of our holdings also are global leaders too. We like firms with strong balance sheets and a willingness to share profits with their owners. We like management teams and business models that are proven to be effective. We tend to hold stocks for years rather than months, but we like stocks which are liquid so that if we do change our view, we can sell out easily.

We describe ourselves 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.

Evolving over time

The shape of our portfolio has evolved over time. For now the portfolio is centred around four countries where we see the best opportunities – Taiwan, Australia, India and Singapore. These countries make up around 90% of our holdings, with smaller positions in South Korea, Indonesia and Hong Kong.

We continue to have zero holdings in mainland China, which sets us apart from nearly all of our peers. We think the combination of the one-party political system, geopolitical risks and the poor state of the Chinese economy make the market unattractive.

We have more holdings in Australia than any other country, and yet none of our top 10 holdings is now in Australia. We ``use’’ Australia to add variety to the portfolio -- which is slightly ironic as some people think it's a market dominated by miners. Of our 10 holdings based there, only two are miners. We have exposure to eight different sectors (packaging, mining, property, diversified financials, insurance, toll roads, energy and retail) from the 10 stocks, which shows how diverse the market really is.

Robust tech demand

This brings us to Taiwan and technology, which represent our biggest country and sector weightings, respectively. Taiwan's equity market was a strong performer last year, boosted by its semiconductor companies and the robust demand for AI-related hardware and applications.

The technology sector stands out in our portfolio. Given the critical importance of the companies we own in the AI supply chain, and the attractive valuations of these companies, we see considerable upside for our six tech holdings – four of which are in Taiwan.

We’ve highlighted some countries and sectors where we see good opportunities, but it’s important to note that our investment process is about creating a highly diversified portfolio of quality income companies from across the region -- in both developed and emerging markets. We have exposure across a wide range of sectors, in addition to technology, including commodities, gold mining, consumer, financials and property, as well as in defence and utilities.

We hold cyclical stocks, as well as stocks that have defensive business models. We hold some higher yielding, lower growth and more value-orientated stocks, as well as lower yielding, higher growth stocks.

Diverse exposure

As we look into 2025, we are feeling reasonably positive and would expect to see earnings and dividend growth in the Asia Pacific region. We think that the Australian, Indian and Singaporean domestic economies are likely to continue to see growth and to outperform peers. As we noted above, we retain a high degree of confidence in the technology sector and in the tech companies that we own, which are primarily Taiwan-listed, and are supported by the AI roll-out.

To be sure, there will be risks this year: we expect geopolitical tensions to remain elevated, and there are potential headwinds in the region from US dollar strength, higher bond yields impinging on credit costs, and Trump administration trade policies. However, we believe that the shape of our portfolio, with its diverse exposures, enable it to perform across a range of scenarios.

Fund risks

• Currency (FX) Risk - The strategy can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.
• Pricing Risk - Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
• Emerging Markets Risk - Emerging markets are potentially associated with higher levels of political risk and lower levels of legal protection relative to developed markets. These attributes may negatively impact asset prices.
• Market Concentration Risk (Geographical Region/Country) - Investing in a particular country or geographic region can cause the value of this investment to rise or fall more relative to investments whose focus is spread more globally in nature.
• Market Concentration Risk (Number of holdings) - The strategy holds a relatively small number of stocks and may therefore be more exposed to under-performance of a particular company or group of companies compared to a portfolio that invests in a greater number of stocks.
• Derivative risk - the strategy may use derivatives to reduce costs and/or the overall risk of the strategy (this is also known as Efficient Portfolio Management or "EPM"). Derivatives involve a level of risk, however, for EPM they should not increase the overall riskiness of the strategy.
• Liquidity Risk (general) - During difficult market conditions there may not be enough investors to buy and sell certain investments. This may have an impact on the value of the strategy.
• Counterparty Risk - the risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the strategy’s assets.
• Charges from capital - All of the strategy’s charges are taken from capital. Should there not be sufficient capital growth in the Fund this may cause capital erosion.
• Stock Connect Risk - Stock Connect is governed by regulations which are subject to change. Trading limitations and restrictions on foreign ownership may constrain the Fund's ability to pursue its investment strategy.

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. 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.