Ask The Experts: China's Urbanisation and Taiwan's Elections Themes
Ng Soo Nam, Chief Investment Officer, Nikko Asset Management Asia Ltd explains how his views on China's urbanisation and Taiwan's elections helped to drive his portfolio's performance.
- Tell us how you structure your portfolio -- do you prefer a broadly diversified portfolio or a more concentrated focus based on fewer 'best ideas'?
We prefer to have a more concentrated portfolio; in other words we prefer to be more selective, and it is in line with our investment process. We concentrate on companies which are riding on good top-down themes, e.g. China's urbanisation and cheap valuations. This narrows our portfolio to a select group of companies at any one time, with 50-60 companies. If we don't have that, we aren't doing our job very well.
-Can you give us an example of one position that has done well for your portfolio, and the basis behind that position?
A theme that has done well is our take on Taiwan's presidential elections. Back in 4Q 2011, political outcome of elections was uncertain, with polls showing a close fight between KMT and DPP. My judgment call was that, the Taiwanese people would not risk economic ties with China. What I did was to visit Taiwan, speak to people on the ground, and it confirmed my belief that people are not going to risk it. Stocks from property and domestic demand names did very well after KMT won.
-Can you walk us through one position that has not done as well, and how you managed that position?
A group of stocks in the portfolio that have a consistent of dividends to anchor a fund's return, e.g. telco companies, REITs and in the last two to three months they have underperformed. But for the specific role they play in the portfolio, I will continue to hold them, and their business case is still very strong.
-Given your outlook, how have you positioned your portfolio to profit from the various investment ideas?
Sticking to what we do best: finding strong companies, strong growth themes from a top-down and cheap valuations. From time to time when a company performs and valuations get more expensive, we find cheaper value elsewhere. We continue to monitor closely how a company is performing in terms of its business operations. For example, the theme of China's consumer growth theme evolves. Twenty years ago, it is about selling affordable goods to the Chinese but nowadays it is also about luxury brands, e.g. BMW car maker. So we have to constantly look into how a theme evolves.
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