Portfolio Chart: A menu of options as bond yields reset higher
With yields hovering close to decade highs across many fixed income sectors, investors are presented with a “menu of options”. Still, selectivity matters as recession risks loom.
With 60% of the world’s population – over 4.5 billion people – living in Asia, the rapid rise of the middle class is a powerful engine for long-term growth. As illustrated below, almost all future growth in the global middle class over the next 7 years is projected to come from Asia1.
Asia is projected to drive nearly all future growth in the global middle class.
The sustained increase in affluence could create a wide range of growth opportunities in the region, driven by powerful long-term trends such as lifestyle upgrades, demographic changes and financial deepening2.
Harnessing Asia’s growth potential requires a long-term perspective as these enduring, multi-year secular themes take time to bear fruit. As illustrated below, investing in Asia ex-Japan equities invariably entails some volatility, but the longer-term outcome could be worthwhile2.
Investing for the long run
As an illustration of long-term investing, the chart below tracks the historical cumulative growth of US$10,000 invested in Asia ex-Japan equities versus short-term US Treasuries over a 20-year time horizon2.
From this perspective, an allocation to Asian equities, in the context of a well-diversified portfolio, can be useful for longer-term goals such as retirement, where investment horizons tend to stretch decades rather than months or years2.
In addition, in instances where Asian assets are underrepresented in a portfolio, we believe Asian equities can present an important source of regional diversification2.
The importance of a bottom-up approach
Nevertheless, investing in Asia should not simply be a passive endeavour for two key reasons:
These factors underscore the importance of on-the-ground presence3 and rigorous bottom-up stock selection to uncover quality and enduring growth opportunities in this highly dynamic and diverse region.
Position sizing and active allocation will also matter to optimise longer-term outcomes for portfolios as investment prospects can change quickly in these fast-moving markets.
Making the most of your CPF with Asia-focused growth solutions
J.P. Morgan Asset Management’s suite of Asia-focused equity solutions can help investors dive deeper and uncover attractive bottom-up equity opportunities through a prudent, disciplined and risk-aware approach4.
The following strategies have been included under the CPF Investment Scheme (for CPFIS List A category).