Dollar’s Twilight Is Case for Stocking Up on Asia for Top Fund

(Bloomberg) -- There are any number of risk factors to which investors can point as reasons for remaining wary on Asian stocks, from friction between North and South Korea to U.S.-China tensions to fears of a second wave of Covid-19 infections across the continent.

But for Rob Marshall-Lee, none of them is enough to overshadow a far more convincing prospect: dollar weakness for years to come.

In fact, he’s so convinced the U.S. currency is on the cusp of a sustained decline he’s seizing on the slump since the outbreak of the pandemic to load up on Asian stocks. His logic: unprecedented stimulus from the Federal Reserve puts the decade-long appreciation in the dollar at risk, and Asia’s markets will have the strongest growth in the years ahead.

“Fed action suggests an end to the extended multi-year dollar bull market,” said Marshall-Lee, the head of emerging and Asia-Pacific equities at Newton Investment Management, where he helps oversee $53 billion. “Demographics and high debt burden are not supportive of the dollar. The growth is in Asia, currently China, then the likes of India and Indonesia.”

Marshall-Lee is taking the wager as the future of a rebound in emerging-market assets remains uncertain. Stocks slumped last week after Federal Reserve Chair Jerome Powell’s warned about a sluggish economic recovery. Tensions have flared between North and South Korea. And India, which accounts for a fifth of his holdings, has faced clashes with China in a border dispute.

His global emerging markets fund is in the top 1%, handing investors a 8.3% return this year even as peers lost 12.5%. He’s been adding to holdings of cyclical stocks that sold off in March and April, and his picks include a nickel miner, which he declined to name, electric vehicle suppliers and Indian consumer-goods companies.

Still, it’s far from certain that the greenback’s gains are over, and signs abound that bets on the dollar’s demise may be premature.

Marshall-Lee is also looking past the risks of renewed trade tension between the U.S and China, as well as a second outbreak of the coronavirus. He argues that global firms will be reluctant to give up manufacturing capacity in Asia and will look to keep access to Chinese consumers, too.

“The trade dispute from 2018 has led to virtually no discernible sustained impact on the companies in which we invest” he said. “Covid has had more impact but the impact is transitory and was over-discounted, providing stock picking opportunities.”

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