Asia Fund Manager Who Beat 98% of Peers Says Rate Cuts Not Cure
King Fuei Lee says there’s a risk of long-term deflation because monetary policy hasn’t stimulated investment and consumption.
(Bloomberg) -- Asian equity markets may face further turbulence down the road as a series of interest-rate cuts in the region are unlikely to shore up economies, according to a top-performing fund manager.
King Fuei Lee, who co-manages the Schroder Asian Total Return Fund, says there’s a risk of long-term deflation because monetary policy hasn’t stimulated investment and consumption. The impotence of central banks is mostly due to structural problems including demographic issues, income disparity and excessive debt, he said.
“If longer-term economic growth continues to be poor, it’s difficult to see what’s going to sustain markets at this valuation,” said Lee, whose fund returned 12.5% annually over the past five years, beating 98% of peers compiled by Bloomberg.
Lee’s comments come as investors weigh how to react to a wave of monetary easing by central banks across the world, pushing bond yields to new lows amid fear of a global recession. The Philippine central bank is expected to lower rates when it meets Thursday, after larger-than-expected cuts on Wednesday in New Zealand, India and Thailand.
The fund manager has been adding protection to his portfolio by buying put options on Hong Kong and China where the fund is mostly exposed to, reducing its net long position to 80% from about 88% in the beginning of this year. While the MSCI Asia Pacific Index was set to complete a two-day gain on Thursday, Asian markets such as South Korea and Malaysia have erased year-to-date gains amid trade tensions between the U.S. and China.
The Schroder Asian Total Return Fund, which is managed by Lee and Robin Parbrook, returned 12.5% annually in the past five years and has gained 10.5% year-to-date, beating the 2.1% advance in the benchmark MSCI AC Asia Pacific ex Japan.
There are still buying opportunities, especially in Hong Kong and Singapore, according to Lee, who says he has a “bottom-up approach” to investing. He said he recently added high-dividend stocks and quality franchises such as some Chinese IT companies.
To contact the reporter on this story: Moxy Ying in Hong Kong at yying13@bloomberg.net
To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Naoto Hosoda
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