CIO Insights


Investing insights from Chief Investment Officer Mike Miller for Community Foundations, Endowments, and other not-for-profit fiduciaries, leaders, and stakeholders.

In a world of ever-growing complexity defined by geopolitical tension, does looking further afield to Asia for investment opportunities make sense?

Mike Miller, CIO | Published October 2, 2023


Why bother?

We believe that the best investments are made based on firsthand knowledge. Being on the ground allows us to read between the lines of market trends to see what local investors are seeing.

Stepping out of our comfort zone and into the Asian arena provided us with a valuable outside perspective beyond the headlines. Fresh insights and diverse viewpoints enrich our fundamental understanding.

Networking in this dynamic environment has opened doors to invaluable partnerships and collaborations, giving us a competitive edge in navigating these markets.

Opportunities abound

The challenge is sifting through the noise.

Hong Kong Remains Hospitable for Investing

Despite the complexity of US/China relations and the capital flight experienced since the pandemic, questions on whether the country/region is “investable” quickly lose merit once on the ground. Many of those who left Hong Kong are coming back, attracted by its robust infrastructure, business-friendly policies, and a well-regulated financial sector.


Is a Regulatory Pressure Release Coming?

Chinese markets are struggling as explosive growth slows partly due to the sheer size of the country—slower growth being ultimately inevitable—and partly due to the strict regulatory regime imposed by the Chinese government.  However, certain signs suggest a potential regulatory easing on the horizon; this could breathe new life into investment opportunities, as growth appears to remain the country’s top priority.


A More Diversified Asia

Asia is no longer a monolith; each country has its own role. It's a mosaic of diverse economies, each with its own unique potential. Having insightful, aligned partners at their doorstep is key to gaining early and transparent access.


Attractively Priced Assets Are Available

In the midst of this diversity, many assets in Asia remain attractively priced, providing a promising entry point for astute investors.

The playbook from the boom years is not likely to work anytime soon. Investors who rode the wave of past game changers—, Tencent, Alibaba, etc­.—may not have the toolkit, mindset, strategy, or capital base to succeed in the new era.  

Plenty of opportunity still exists—for example, buying relatively inexpensive Chinese businesses that exhibit the following:

  • Strong growth.
  • Net cash on their balance sheets.
  • Generating large amounts of free cash.

Such names can generate very compelling returns over time, both in absolute terms and relative to US/global cap-weighted indices, which rely on the “greater fool” theory for valuation.


Japan is Poised for Leadership

  • Japan is seen as far more safe and stable than any of the major Asian countries. While the power/growth dynamic in Asia is continuing to develop, Japan’s democracy and exemplary stability position it as a leading reference for many. 
  • Despite the country’s historically poor corporate governance, the government's stewardship principles are beginning to yield encouraging results.
  • Japan’s two largest trading partners are the US and China; it is not in Japan’s interest to upset either. However, lasting damage lingers from US trustworthiness and perceived lack of reliability from the Trump era.
  • Japan is playing the long game, which includes anticipating the potential for regular changes in government in both the US and China.

Where to from here?

Stick to fundamentals.

Disciplined Investing

Of course, geopolitical risks are a reality that cannot be ignored. It's imperative to acknowledge their presence and incorporate strategies to mitigate their impact on your investments.

However, for example, while China has and will continue to exert increasing control in Hong Kong, the government also wants the region to remain a bridge to the rest of the world; the fact that the country is in the midst of a massive airport expansion is a clear and direct sign of how the country views Hong Kong. 

Nevertheless, we believe it is important to be clear-eyed when assessing these potential pitfalls:

Be Globally Diversified

In an interconnected world, global diversification is your shield against geopolitical uncertainties. Spread your investments wisely to safeguard your portfolio.

Size Exposures Thoughtfully

Carefully assess the size of your exposures to regions and industries vulnerable to geopolitical tensions. A prudent approach can minimize risks without sacrificing potential returns.

Consider a National Government’s Long-Term Priorities

Understanding a nation's long-term priorities can provide valuable insights. Align your investments with countries whose policies beneficially align with invested industries, and avoid or mitigate exposure to the opposite.

Ultimately, knowledge is the key to success, especially knowledge gained from embedded local players that intimately understand their markets and areas of expertise. Coupling this with an approach grounded on the fundamental laws of finance, prioritizing diversification alongside attractively priced and out-of-favor securities, allows for smart investments able to generate outsized returns in otherwise complex regions.

Based on our recent investigation of Hong Kong and Japan, we believe the opportunities available from these two regions hold immense promise and return potential for savvy, responsible investors.

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