After 15 years of underperformance, Asian markets show promise

For much of the past two decades, global stock markets have been driven by one big idea: American exceptionalism.

That story has rested mainly on technology and, more recently, artificial intelligence. But the risks of relying too heavily on one country and a handful of companies are becoming harder to ignore. So too are the high prices investors are being asked to pay for US shares. Against that backdrop, Asian markets are beginning to look more interesting.

This is according to Ishreth Hassen, Portfolio Manager at Foord Asset Management, who says Asia’s long period of market weakness has created better opportunities for patient investors. ‘After 15 years of underperformance, we started to see Asia reach its low point and begin turning the corner from 2024 onwards.’

By contrast, Hassen notes that US shares are now priced close to historic highs, at levels that may be difficult to sustain. ‘Over the past 15 years, about 80% of the US market’s stronger performance came from a stronger dollar and investors paying more for each dollar of profit, with only 20% coming from rising profits. Those two main forces are unlikely to repeat in the same way.’

‘The dollar is already expensive,’ he says. ‘At the same time, US trade, geopolitical and monetary policies have made dollar assets less attractive to foreign investors. US shares are also extremely expensive compared with the rest of the world.’

Hassen believes Asia offers stronger profit growth and better demographic trends than the US, yet its markets remain far cheaper. ‘This makes us very excited about the prospects for our Asia ex-Japan Fund,’ he says. The Asia ex-Japan region is currently trading at around 11-times earnings, roughly half the US level. Put simply, investors are paying about $11 in price for every $1 of expected company profit in Asia, compared with far more in the US.

He adds that recent energy-price pressures have weighed on Asian markets, widening the gap between price and long-term value. ‘This is creating some of the most attractive moments to invest in the region that we have seen in years.’

China, meanwhile, is in the early stages of reshaping its economy. Growth is slowly shifting away from property and heavy construction towards advanced manufacturing, technology and consumer demand. ‘This shift began with electric vehicles, materials processing and renewable energy,’ says Hassen. ‘It is now spreading quickly into semiconductors, biotech, aerospace and AI. China’s listed companies remain meaningfully undervalued relative to their long-term prospects.’

That said, the American war on Iran and the effect on energy prices have also hurt sentiment towards Asian markets outside China. Hassen says this has made several companies look increasingly attractive. ‘Much of the market is throwing the babies out with the bathwater. That is giving us many interesting opportunities.’

He highlights APR in Korea, ‘a one-of-a-kind global cosmetics business run by a visionary founder and exceptional management team’, as well as Avian Brands in Indonesia, a family-owned company and the country’s largest producer of decorative paints.

Both businesses, he says, are still priced attractively despite strong growth prospects. ‘These are companies most investors would never have heard of. They receive little attention from the investment community, which allows us to buy them at very attractive prices and wait for the market to recognise their true quality.’

Foord’s global funds positioning is not a bet against the US, but the result of disciplined, bottom-up stock investments rather than buying the biggest companies in any region. ‘We go where we find value,’ Hassen concludes. ‘And we are increasingly finding a lot of value in Asia.’