From biscuits to power tools: investment opportunities in Asia

James Yardley 07/02/2023

Emily Whiting, investment specialist for the JPM Asia Growth fund, joins us this week to provide an overview of Asian markets as we head into 2023, including the ASEAN region and China. Emily also gives the investment thesis for top holding TSMC and tells us about two lesser known, but exciting names in the portfolio: an Indian biscuit company and the global leader in power tools.

Hello, I’m James Yardley, and today I’m joined by Emily Whiting to discuss the JPM Asia Growth fund. Thank you for joining us, Emily.


[00:10] Pleasure to be here.


Now Emily, let’s start with the big picture. So, what is the outlook for Asia for 2023? We’ve heard a lot about China reopening. What can we expect?


[00:23] Well, I think it’s fair to say that we’re all delighted that 2022 is behind us. It was clearly a really difficult year for Asia, and you highlight the fact that China was front and centre of that. And so I think therefore, as we go into 2023, the rather quick reopening of China has to be a huge catalyst for the region. I think, not only the China reopening and, as we’ve all experienced in the UK, everything that goes along with that by way of the so-called ‘revenge spending’ and increased consumption and travel again, but also I think we’re in a situation where, for China, a lot of the rate [inaudible] and the policy overhang that’s concerned markets so much in the past couple of years, feels like it’s behind us. The rhetoric coming out from authorities suggests that’s very much the case. And so, I think we look forward into the next 12 months, with a lot more optimism around China.


I would caution that we would expect volatility within this market. I don’t think it’s necessarily all going to be a smooth, one direction year, but I do think China will hopefully uplift a lot of what we see in Asia. 


When we look elsewhere across the region, it’s also worth highlighting the other [inaudible] of India, which did have a strong 2022. And a lot of that is because it’s far more insulated from global growth, which we clearly saw taking a hit. And also from China. India by nature is far more domestically orientated – that served it very well last year. As a result, when we look at it versus other markets, it now looks slightly rich, from an Asian context. I think there are still some great stocks – you need to be selective – but I think India, based on the fact it had done so well last year, it’s going to maybe be slightly harder for it, slightly trickier for it to keep doing so well, especially when we see the catch up coming through from the likes of China, as well as maybe markets such as Korea and Taiwan, which have a tighter tie to global growth and clearly were impacted last year, but as global growth and tech sentiment starts to pick up again, should hopefully do quite well.


And just to make one final observation – I mentioned how expensive and rich India is looking just from a pure evaluation standpoint; you would contrast that with somewhere like Korea that’s looking very close to its historical low valuations. So, I think what we see as stock pickers is a huge amount of opportunity, very diverse and divergent markets with very different drivers this year.


And we hear a lot about China and India and Korea, but I mean, of course there are so many countries in Asia. So, what are the other opportunities there, which you’re finding in the Asean region, for example?


[03:06] Well, I think Asean is a great example because we’ve mentioned some of the bigger, more well-known markets – Asean, which just for viewers, stands for the Southeast Asian Nations – a real collection of markets that include the likes of Indonesia, Singapore, Thailand, Philippines. That offers us huge potential that is fairly untapped in comparison with those larger markets of China and India. 


And I think one of the biggest drivers for the Asean space is its people. It has over 700 million by way of population. If you looked at it as a block, it’s the sixth largest economy, globally, by way of what it can do going forward. And when we think about the size of that population, I think there’s two interesting standouts. Firstly, their age. So, across the Asean space, it’s forecast that <inaudible> age will only peak at about 2045. So, we’ve got another 20 years of that growth that’s coming through. 


And then the other thing is that it’s a hugely underbanked and a very low financial service penetration. And that gives us great opportunity for banks in particular, as people start to have more money and take out loans and mortgages and credit cards. 


So, when we look at Asean, we actually find two big themes. Firstly the banks; so the likes of Bank Rakyat [PT Bank Rakyat Indonesia Tbk] in Indonesia and secondly, the tourism recovery trade. We see that <inaudible> in a market such as Thailand, but from a top level market standpoint, Thailand’s not hugely attractive to us right now, but in companies such as Airports of Thailand [Airports of Thailand Public Company Limited], which as the name suggests benefits very clearly from tourism, we expect that type of name to do very well, not least as Chinese tourists start to really jump back on and travel again to the degree that we used to see pre-covid. So, I think the Asean space offers great diversification and, to us, some really strong stock opportunities.


And turning to the fund, it’s a very concentrated fund. I think you’ve got high weights in your top five positions. TSMC for example is in there at a 7% weight. What gives you such conviction and confidence in a name like that?


[05:28] Hmm. So TSMC – Taiwan Semiconductor Manufacturing Company – has been a longstanding big position in this fund. And you are right, one of the things that we want to do with this fund, is show where our conviction is. To us, there is no point holding 200 names of half a percent each; you want to really go into the companies that you feel have the opportunity to deliver strong returns to our end client. This is definitely that type of company. What the company does, and it’s been running for over 30-40 years, is it manufactures semiconductors for its customers. It doesn’t design them, but it is one of the leaders – or it’s the leader – globally for manufacturing semiconductors, which as we know, are in every aspect of our lives nowadays. Cars, watches, phones, laptops, security systems and so on.


And it’s got such a strong leadership position built from its economies of scale, that it keeps just almost pushing on further and further ahead of the number two and number three players in the market and so on. And I think the numbers to my mind illustrate this. So, this is a 500 billion dollar company; it’s one of the largest companies in Asia and globally. And over the next three years, they have committed to investing 100 billion US dollars in capital expenditure – in CapEx – so, almost by way of furthering the development of what they’re able to offer. And what that serves to do, is clearly push them even further ahead. 


The other reason that we really like this company is we want to invest in companies where we trust that management are trying to do the right thing by us as minority investors. And one of the biggest signals and signs that we can see that that happens and shows through, is when companies pay dividends. And TSMC are very committed, they have a very clear dividend policy. They talk about being a sustainable dividend, ie. they recognise they want to be paying it out year on year. And they’re the types of things that really give us confidence that the business is trying to do the right thing over the long term. So, it’s got a great product and economies of scale. It’s got a very strong leadership position that it keeps growing in, but it’s taking all of its stakeholders along with it. And to us that’s a great example of types of companies that we want to be holding in the fund, over the long term.


And can you give us one or two other examples of holdings within the fund perhaps, which our viewers haven’t heard of before?


[07:55] Most definitely. I mean I think the beauty of the Asia Growth fund is there are a whole host of different stocks that, by nature of the companies and countries that they sit in, our viewers won’t have heard of them. 


So, biscuits, we all like biscuits. We hold a biscuit company in India called Britannia Industries. What they’ve been able to do is, as the income and as the tastes of the Indian consumer start to change and start to develop, so too does their product line. So, they started off by just manufacturing biscuits. They now do a whole host of what they term ‘package snacks,’ so, cake and croissants and wafers. And also on the beverage side, things like milkshake. This is a company that has recently announced its 38th consecutive quarter of market share growth. That’s 38 quarters, quarter on quarter where it’s grown, what it’s able to do in that industry.


They must be some good biscuits!


[08:56] Yes, exactly. Well, the thing is biscuits never go out of fashion, do they? I think we’ve all learned that. So, you can never beat a biscuit! What they’ve also really done is ensure that they can supply to everyone across India. It’s clearly a very large market and the success of a lot of companies across Asia, is around their logistics. And what Britannia have been able to do, is target rural India just as much as benefit from e-commerce. And so that breadth of logistics and distribution has stood them in really good step, by way of getting those biscuits and the croissants and the milkshakes out to everyone across the market. So, I think that’s a great example of one type of company. 


I’d almost go to another end of the spectrum by way of innovation and development with a company that we hold called Techtronic [Techtronic Industries Company Limited] who are Hong Kong-listed. And they are the number one company in global power tools, which sounds fairly boring, but you realise that we all actually get impacted by what this company serves to do. And what it basically has done over the last decade is it’s really innovated and it’s got rid of cords essentially. So, it’s creating cordless – so battery driven power tools. So, not just power tools used in building works, drills, and so on, but also in garden machinery. Okay, so what a great idea – inventing a hedge trimer that was just as powerful where you couldn’t accidentally cut through the cord. It’s all battery powered. This company, through some of their brands, have now become one of the number one or number two market share in different markets. So, in the US market, which historically has always been dominated by Black & Dekker, Techtronic are now the number one through their brand called Milwaukee.


In the UK and across Europe, we may well have heard of brands called Ryobi very big in garden machinery. So, your leaf blower and your hedge trimmer and your garden vac and so on. And so what they’ve done is take innovation and say, how can we help the consumer? And in doing so, over time they’re building market share. 


So, hopefully that just gives people a sense and a flavour of the types of companies that we’re after. At the heart of all of this is good management and it’s companies that we can go in and talk to, and as I said, feel trust about how we’re trying to invest across Asia for our clients.


That’s been really interesting. Emily, thank you very much.


My pleasure. Thank you for having me.


And if you’d like to learn more about the JPM Asia Growth Fund, please visit, and please also remember to subscribe to the channel.


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