Asian equity markets over the past two years have been shaped by a narrow group of momentum-led themes, with capital concentrating in areas such as artificial intelligence, electric vehicles and biotechnology. Valuation discipline has often taken a back seat to narrative. Against this backdrop, Fidelity Asian Values PLC has sought to challenge prevailing assumptions about the nature of opportunity and risk in Asian smaller companies.
According to portfolio manager Nitin Bajaj, long-term evidence offers a useful counterpoint to recent market behaviour. Analysis of three decades of data indicates that Asian small-cap value strategies have outperformed other segments of the regional market over time.
Many investors equate Asia’s economic expansion with technology-led disruptors or consumer franchises capturing structural trends. However, long-term outcomes suggest that durable returns have more often been generated by steady businesses acquired at reasonable valuations. Markets periodically reward excitement, but they can also overpay for it. In contrast, resilient companies with dependable cash flows and sensible pricing have tended to compound value over extended periods.
This philosophy underpins the trust’s portfolio construction. Rather than targeting headline-grabbing names, the approach resembles the acquisition of a private business. The emphasis falls on whether the company offers products or services that customers genuinely need, whether it earns an acceptable return on capital, whether management demonstrates competence and integrity, and whether the balance sheet can withstand economic stress. Crucially, valuation is central. Paying a price that allows for a margin of safety is seen as a primary defence against permanent capital impairment.
The portfolio includes businesses such as an Indonesian food manufacturer, an Indian security services provider and specialist distributors within regional supply chains. In Taiwan, Pacific Hospital Supply, a producer of medical consumables, represents a smaller company operating in a sizeable market. Under new management, it has been gaining share while trading on valuation multiples that support an attractive dividend yield. In Thailand, Mega Lifesciences operates in wellness and pharmaceutical distribution with established margins and a broad network.
Volatility is often equated with danger, particularly in emerging markets and smaller capitalisations. Bajaj argues that true risk lies in the permanent loss of capital, which tends to arise from weak business models, poor governance, fragile balance sheets or excessive entry prices. By focusing on financially sound companies, credible management teams and conservative valuations, the strategy seeks to mitigate these structural risks.
Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.
