Asian equity markets continue to offer opportunities outside the companies and sectors attracting the most attention.
Recent market gains have been concentrated in certain parts of the region, leaving other businesses trading at lower valuations. This has created a wider gap between highly valued companies and those receiving less attention.
For investors taking a value-focused approach, this can provide opportunities to identify businesses where share prices appear low relative to their earnings, assets or longer-term prospects.
Smaller companies are one area where this gap can be particularly evident. These businesses can receive less coverage than larger companies, potentially leaving some opportunities less widely recognised by the market.
China and Indonesia are examples of markets where lower valuations can be found across selected companies. Businesses with established operations, strong balance sheets and the ability to generate cash can remain attractive when their valuations are relatively low.
The focus is therefore on individual company fundamentals rather than following the strongest areas of the wider market. Earnings, cash generation, balance sheets, management and capital allocation can all play a role when assessing whether a company is appropriately valued.
This approach can also result in periods of weaker performance when markets favour a narrow group of larger or higher-growth companies. However, valuation gaps can change as investor attention moves between different parts of the market.
Asian equities therefore continue to provide a broad range of investment opportunities, including companies outside the areas currently receiving the greatest market attention.
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.
