November 28, 2022 – Franklin Templeton hosted last week the APAC Investor Forum 2022, a hybrid event in Singapore that brings together a panel of investment experts from our collection of Specialist Investment Management teams to discuss the evolving macro environment that investors face today and the potential investment roadmap for the next decade.
Investment experts including Jonathan Curtis, Portfolio Manager, Franklin Equity Group, Ferdinand Cheuk, Portfolio Manager, Templeton Global Equity Group and Desmond Soon, Head of Investment Management, Asia (ex-Japan) / Portfolio Manager, Western Asset Management, shared their latest observations on key macro shifts and the upcoming risks and opportunities for investors.
Commenting on opportunities in the technology sector, Jonathan Curtis, Portfolio Manager, Franklin Equity Group, said:
“While we have seen challenges in consumer levered technology sector, we are big believers in digital transformation, and we see long-term opportunities across digitalization themes such as secure cloud and SaaS (software as a service) and artificial intelligence. Secure cloud services underlie all digital experiences, and we estimate that the cloud computing market will likely reach over $3 trillion in size. Despite some brake tapping, fundamentals appear generally robust in the enterprise technology sector. Even as the world is reopening, digital learnings from the pandemic are being operationalized and extended, with companies continuing to extend tech investments to other parts of their businesses to enable more efficient operations, and that is helping to drive general resilience in the B2B side of technology.”
Commenting on the outlook for Asia equities, Ferdinand Cheuk, Portfolio Manager, Templeton Global Equity Group, said:
“We employ a bottom-up valuation-based investment philosophy and we see compelling investment opportunities in Japan amongst Asian equities, especially with the yen causing dislocations in the market. Looking ahead, Japan’s economy should prove more resilient than most developed market peers in a recessionary scenario, given the tailwinds from the COVID re-opening, weakening yen, as well as supportive monetary and fiscal policies. From a sector perspective, we are focused on domestic companies and structural themes that may enable Japanese companies to remain resilient both in this current environment and going forward such as digitalization. There are a number of Japanese companies with competitive positioning along the value chain which includes semiconductors, IT services, software and systems integrators.
When it comes to Chinese equities, a selective approach is key as market volatility may persist in the near term. We are focused on domestic companies that will benefit from long-term thematic growth drivers including rising consumption and localization. For the rest of Asia, our focus is on dividend-paying companies with the solid balance sheets and strong earnings growth to help them achieve yield, stay resilient amidst macroeconomic headwinds and serve as a defensive element for our portfolio.”
Commenting on risks and opportunities in Asia’s fixed income markets, Desmond Soon, Head of Investment Management, Asia (ex-Japan) / Portfolio Manager, Western Asset Management, said:
“Fixed income, for the first time in decades, is offering a very sizeable income and yields are very attractive currently. Going forward in the next three to five years, fixed income is expected to offer good value. Buying high quality bonds for capital preservation, income generation and liability immunization is the way to go. Capital preservation, especially, has never been more important in a very uncertain world.
In terms of opportunities, Indonesia and India stand out as two key places to look at in the emerging world. Indonesia 10-year government bonds are seeing a 7% yield, and the Rupiah is also one of the top currencies this year. Similarly, Indian bonds are also looking interesting, with the yield of the 10-year Indian government bonds reaching over 7.25% yield as India emerges strongly from the COVID-19 pandemic and consumer confidence in the country is high. It is important to consider that a lot of Southeast Asian and South Asian countries will also benefit from the China Plus One strategy of diversification.”