Leading ASX fund manager Ellerston Asian Investments Ltd (ASX: EAI) says it's time to invest in Asian shares.
Mary Manning from Ellerston wrote in an article for Livewire that the positive trade outcome at the recent G20 meeting and dovish comments by US Federal Reserve Chairman Powell are both important catalysts for a rally in Asian markets into the year-end and early 2019.
The MSCI China Technology Index is down over 30% since its January high while the NASDAQ is almost flat.
There have been four key reasons for the decline. There have been concerns about the impact of the trade war on technology supply chains, currency, a rotation out of growth and finally various stock-specific problems.
There are promising signs that the trade war could be coming to an end with the temporary halting of new tariffs. The US dollar may stop strengthening with Chairman Powell suggesting rates are near neutral. Ellerston thinks the rotation out of growth shares may have ended, for now at least.
Some of the biggest Asian tech shares like Tencent and Alibaba are trading below their long-term averages according to Ellerston. Tencent's fortunes could quickly turn around if game approvals resume by the end of 2018 or in the first quarter of 2019.
Ellerston sees good buying opportunities with Tencent, Alibaba, Baidu, Largan and Sunny Optical. However, once the 90-day trade war truce is over then volatility may return.
Obviously, we can't buy these Asian businesses directly on the ASX. But, we can buy them indirectly through exchange-traded funds (ETFs) like BetaShares Asia Technology Tigers ETF (ASX: ASIA), UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP) and Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE).
