Best Asian investment opportunities are hiding in overlooked companies

Asian equity markets have become increasingly concentrated around artificial intelligence. A relatively small group of technology and hardware companies has driven much of the market’s recent gains, while many cheaper companies have been left behind.

That has created a difficult backdrop for Fidelity Asian Values PLC. The Trust has limited exposure to the Korean and Taiwanese hardware companies benefiting from heavy spending on AI infrastructure, and that positioning has weighed on relative returns.

In the second quarter of 2026, Asian markets rose by around 15%, while the Trust declined by approximately 5%. The gap shows how strongly recent market returns have depended on a narrow group of AI-related companies. The Trust’s approach has not changed in response. Its focus remains on buying good businesses at prices that leave room for uncertainty.

The issue is whether current valuations already assume too much future growth. Large investment cycles can produce strong earnings for suppliers because one company’s capital spending becomes another company’s revenue. That can support earnings for some time, but it does not guarantee that those earnings will remain at the same level over the long term.

For Fidelity Asian Values, price therefore remains central to the investment decision. A strong company can still be a poor investment if too much future growth is already reflected in its valuation. That principle has guided the Trust for 30 years. Asian markets have changed substantially over that period, but the investment process remains focused on individual companies rather than index weightings or current market popularity.

The Trust is finding some of its clearest valuation opportunities among smaller Asian companies. These businesses can receive less attention when capital is concentrated in large, fashionable sectors, creating wider valuation gaps.

China is one of the main areas of focus and accounts for around one third of the portfolio. Some holdings trade at between three and five times earnings, while certain companies have market values below the cash held on their balance sheets.

Medlive is one example. The company operates China’s largest medical research platform and works with pharmaceutical companies on targeted academic marketing. When the Trust invested, Medlive’s cash holdings were close to its entire market capitalisation, meaning the market was assigning little value to the underlying business despite continued double-digit growth.

Low expectations can reduce the amount of future growth needed to justify the share price. They can also provide a margin of safety if trading conditions prove weaker than expected, although they do not remove the risks associated with smaller companies and emerging markets.

Indonesia is another market where the Trust sees value. Its Indonesian holdings trade on an average price-to-earnings ratio of around seven times and offer dividend yields of approximately 8.5%.

Bank Central Asia is one of the companies held. The bank has built a strong deposit franchise, maintains a conservative underwriting culture and has generated returns on equity above 20% over a long period. Its balance sheet, operating record and valuation fit the Trust’s preference for established businesses available at prices that provide some protection against uncertainty.

The Trust does not rely solely on low valuation multiples. Its process also looks at how a company earns money, the strength of its competitive position and how management allocates capital. This is particularly important among smaller companies, where understanding the business in detail can matter more than broad market trends.

The current market remains heavily influenced by AI-related spending, and that could continue. Fidelity Asian Values is positioned differently. Rather than paying higher prices to participate in the strongest current theme, it is concentrating on less expensive businesses where expectations are lower.

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.