Be Globally Diversified
In an interconnected world, global diversification is your shield against geopolitical uncertainties. Spread your investments wisely to safeguard your portfolio.
CIO Insights
Investing insights from Chief Investment Officer Mike Miller for Community Foundations, Endowments, and other not-for-profit fiduciaries, leaders, and stakeholders.
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—JD.com, 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.
