We recently publish the second edition of the "Asian Equities Asset Class Spotlight," an annual publication that aims to showcase our insights and observations about this growing asset class. This follows the completion of our annual review of almost 50 strategies across four Morningstar Categories: Asia ex-Japan Equity, Asia Pacific ex-Japan Equity, Asia Pacific inc. Japan Equity, and Asia ex-Japan Small/Mid-Cap Equity.
We look at the year that was when it comes to Asian equities, as measured by the MSCI AC Asia ex-Japan Index, which delivered a positive return of 5.44% for 2016, a respectable amount in an uncertain and volatile environment. This doesn’t tell the whole story—markets had to face multiple macro events during the year, starting with a sharp sell-down in China over growth concerns and ending with the somewhat unexpected election of Donald Trump as US president in November 2016. Value was the winner over growth, reversing the previous year’s trend. We look at what factors drove value cyclicals, causing managers to shun quality growth names.
Historically, investors have seen Asian equities as purely a growth story, but this is changing and we look at why yield is playing a greater consideration when it comes to using an Asian equity strategy. We look at the structural factors and shifts behind this, and provide a look into some of the preferred Morningstar Medalists that offer investors a mix of capital appreciation as well as income.
The rise of passive investing and exchange-traded funds has been felt across the equity spectrum, and it is no different when it comes to Asian equities. We look at what has driven the shift towards passive investing. Unlike some of the major developed markets, Asian equities continues to show some promise when it comes to hopes of active investing.
The report is available in Morningstar Direct™, the company’s global investment analysis platform for institutional investors.