Andrew Gillan, Head of Asia ex-Japan Equities, discusses the prospects for Asian equities following the shock UK vote to exit the EU.
Our view was that ‘Remain’ would win but that it would be a close call. Our portfolios are relatively defensively positioned – not specifically for Brexit – but rather weaker global growth generally. Our strategic shift in the last few months has been to overweight consumer staple stocks in Taiwan, India and to a lesser extent the Philippines. Our other most significant overweight is to the technology sector and this includes Indian IT services companies, Chinese internet stocks, and technology hardware companies including TSMC and Samsung Electronics. Our view is that these companies can grow earnings despite the weaker global growth outlook. We reduced our exposure to banks across the region particularly in ASEAN as we still see sluggish revenue growth and the increasing likelihood of higher bad loan provisions through the second half of this year and into 2017. CK Hutchison is one of our holdings which we have maintained that is most exposed to Brexit, but generally the direct exposure to the UK is not high in our Asian Growth portfolios. The impact is more the uncertainty and repercussions for Europe. This will all add to the existing concerns on global growth.
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