Invesco Perpetual: Long-term Asian equities outlook is good

Stuart Parks, head of Asian equities at Invesco Perpetual, comments on how market turbulence in H2 2008 affected the sector, and the long-term focus of the Invesco Asia Trust plc.

Asia's equity markets staged a recovery during the period, most notably in December when they enjoyed a year-end rally. This rebound was more a reflection of the markets having been previously oversold than of an improving outlook. Indeed, the economic indicators continued to deteriorate with both exports and activity indicators slumping. On the positive side, the region's authorities have been proactive in attempts to ease the effects of the downturn through lower interest rates and fiscal stimulus packages - the most notable of which was the US$580bn spending programme announced in China - equivalent to 15% of GDP. It is worth remembering that, for the most part, Asia is structurally sound. In general, the region's governments, households and companies have low leverage and debt levels.

The Invesco Asia Trust portfolio remains focused on businesses that have sustainable earnings, strong market positions and solid cash flows. Domestic demand is an important theme, based around positive demographics and savings trends in Asia. The largest underweight is in banks, where the likely growth in non-performing loans could negatively impact earnings, but we are overweight the insurance sector where we see sustainable growth prospects and attractive valuations. We are also underweight utilities, which we believe expensive and offer limited growth prospects. Hong Kong is the largest geographical weighting, as we believe it has quality businesses that can benefit from China's long-term growth potential and from exceptionally low levels of US interest rates.

The Company is currently positioned to benefit from a market recovery, and we remain confident of the long-term outlook for Asian markets.