Emma Wall: Hello, and welcome to Morningstar. I’m Emma Wall, and I’m joined today by Joshua Crabb, Old Mutual Global Investors Head of Asia Equities, to give his three themes for outperformance in Asian equities.
Joshua Crabb: Good morning, Emma.
Wall: So, what’s the first theme today?
Crabb: I think the first one for me, it really sits around, what I’ll call, the sort of value that we see in the market and the inflection point. We think people very underweight Asia and we think that is going to be a great opportunity. We’ve seen a lot of investors who’ve been looking, very few people have taken advantage, because Asia has been underperforming for almost six years until the last year. People are really focused on independent growth companies, high-quality companies, and the valuation range of these companies is now at a very, very high level.
Now, when we look at sort of certain areas, whether that’s industrials, financials, et cetera, we are seeing a great value opportunity there. So, firstly, Asia much cheaper than the U.S. Secondly, things are starting to improve, but not in the areas where people currently own.
Wall: So, it’s about being a stock picker?
Crabb: Well, this is where we are seeing the dispersion starting to pick up, which is very interesting. People are going around saying is these events occurring, but what we’ve really seen, and this is a global phenomenon, is stock dispersions being at the highest level since we’ve seen in 2009, and we often see this around inflection points.
So, absolutely, this is a great time. It’s not about focusing on individual sectors or countries, it’s really about digging in and understanding what is going on with the companies.
Wall: And what’s your second theme today?
Crabb: Okay. So the second one from me at the moment is what people are starting to turn, the reflation theme. Now, if we look at financials, if we go back six months ago, everyone hated materials and oil, and…