Matthews Asia
  • Contact Us  |  Careers  |  Change Site:
  • Submit

Matthews Asia Snapshot


Reflections from Europe

Week of November 03, 2017


The view from London

I am just back in San Francisco from visiting clients in Europe and the United Kingdom. The weather was unseasonably warm and attitudes toward Asia were coolly optimistic. There was increased interest in the Asia region, for sure, and clients asked about the recent performance of Asian equity markets and whether an earnings recovery might be sustained.
 
More European clients treat Asia as an investment destination in its own right rather than looking only at the emerging market asset class. They were interested to hear that our experience was that most of the flows into Asia from the United States had probably come from passive emerging market exposure that might be linked to movements in the U.S. dollar, rather than by a desire for core exposure to the region.
 
I found this heartening because it suggests that sentiment toward the region is still not overly optimistic. Benchmark moves have been concentrated in a relatively small group of stocks. If the global monetary environment remains stable and earnings growth continues to broaden across the region, as I expect it will, then plenty of people are still sitting on the sidelines as far as core active allocations to Asia are concerned. Lots of people seemed to say they are “waiting for the pullback,” even though Asia’s markets have not run up all that much so far in a medium-term historical context.

Investors in both Europe and the U.K. quizzed me about valuations in the United States and asked whether I thought they were expensive. Investors seemed generally keen to trim their U.S. holdings, but indicated they were still adding more to their European exposure than to Asia.
 
In contrast to my previous trips—when people said their Asia allocations were as low as they could remember—this time some investors said they had moved to more neutral allocations. In a way, I found this also encouraging because the mood in Europe toward Asia has been less pessimistic than the mood in the United States.

 
Robert Horrocks, PhD 
Chief Investment Officer
Matthews Asia


The views and information discussed in this report are as of the date of publication, are subject to change and may not reflect current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. Investment involves risk. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Past performance is no guarantee of future results. The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Matthews International Capital Management, LLC (“Matthews Asia”) and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.