Asia is a dynamic market for investors that can offer tremendous opportunities given its staggering growth. It's also a place where risks are high - especially with the latest indications of slowing growth in China. So what should investors do now - and what countries and stocks have the best potential?
Paul Simons, head of portfolio management, Asia/Pacific, with Pyrford International, was here for a Q&A, which can be found below. Those on a mobile device should click here for an easy-to-read format.
Paul Simons: Hello Katherine, thanks for hosting me this afternoon, I'm looking forward to taking part.
Globe and Mail editor Katherine Scarrow: We're pleased you could join us today, Paul. We've got a number of questions already, so let's get started.
Reader Peter asks: Which country in Asia is the most preferred place to invest in?
Paul Simons: As you know the Asian region is very diverse ranging from developed markets like Australia and Japan to smaller and less developed ones like Malaysia. It's important to keep the right time horizon in mind but right now we like the dividend yields available in markets like Hong Kong and Taiwan along with the longer term growth of somewhere like Malaysia.
Reader Frank asks: For average small investor is ETF the best way to go? What are some of the more liquid Asian ETF for Canadian? Recommendations?
Paul Simons: Certainly the ETF marketplace has developed significantly in the last few years and does indeed offer a relatively easy and low cost way of getting exposure to the region. Keep in mind though that there will be significant differences in the performances of countries over time and obviously of stocks within each country so with an ETF you'd miss out on the stock picking results of those fund managers who have a long track record of finding the best opportunities. There are a number of mutual funds which can give access to the region in this way. I can't really give you a recommendation of a specific ETF but BMO in Canada have a good platform which might be a good place to start.
Reader 69buick asks: Why would anyone invest in Asia at this point in time?
Paul Simons: Because over the long term it will have one of the fastest growing economies in the world driven by populations which are generally young and expanding .individuals who have very low levels of debt and a huge appetite for the standards of living we have now in Europe and North America. In addition government finances are generally in much better condition so there is no need to be raising taxes and cutting public spending as there is elsewhere. Interestingly much of Asia's potential is in encouraging its citizens to save slightly less and spend slightly more, pretty much the opposite of the issues you and I face at home! As I mentioned earlier time horizon is key and there are always areas to avoid in the short term but the region will provide very attractive returns to long-term investors.
Reader Peter asks: Between China and India, which country offers a better opportunity for investment? As a recent suggested that India is posied to overtake China's growth rate in 2013.
Paul Simons: Peter that's a great question and one we give a lot of thought to. China has certainly generated the most media coverage in recent years, not all of it for positive reasons. In its favour China now has great infrastructure - fantastic roads, airports, telecommunications and energy supply. It also benefits from a very entrepreneurial culture and government which can make quick and powerful decisions (though not all of them right!). It's weaknesses are that it's population, whilst large, is aging rapidly - there are already labour shortages in certain areas and historically it has been hard for companies to enforce patents or copyrights in China so they have protected them by keeping them out of the country altogether. India by contrast has much weaker infrastructure and much slower decision making at government level but a younger population which is well educated and largely English-speaking. We expect both to continue to grow strongly over the long term but once India improves some of its infrastructure I think it will have a real advantage.
Reader mack asks: Is investing in Asia at this time primarily a long term investment or is it also possible to have good short term results?
Paul Simons: Mack - Plenty of people make good money from short term approaches but you have to keep in mind that many of the countries in the region are still developing their capital markets and the regulatory bodies which control particular industries. As a result there can be nasty surprises if the rules are changed at short notice. If you really want to pursue a short-term approach I would look for companies with sound business models and balance sheets whose share prices have been driven down by wider economic concerns, possibly unfairly. If those concerns disappear they may perform very strongly in the short term but really the soundest advice I can give you is to take a slightly longer term view as that should present better opportunities.