Market review
In final quarter of 2024, the Asia Pacific equity markets exhibited mixed performance affected by various regional and global factors. The Taiwanese equity markets saw strong performance largely driven by semiconductor stocks, which account for a large portion of this equity market. TSMC for example saw its stock price rise by 16% during the quarter.
After several years of strength, the Indian equity market struggled during the quarter with slowing corporate earnings growth earnings growth and large foreign fund outflows. China continued to face headwinds due to uncertainties surrounding potential US tariff policies under the incoming Trump administration.
South Korean President Yoon Suk Yoel surprised markets by declaring martial law but this was swiftly overturned by the National Assembly the following day. After one failed impeachment vote, the National Assembly voted to impeach President Yoon.
Fund activity
During the quarter the fund produced a negative return that underperformed the benchmark, with strong asset allocation offset by weak stock selection. Materials and consumer staples were the largest positive contributors to performance, while financials and consumer discretionary struggled. By country, the largest positive contributors were Taiwan, India and Singapore, while China and Australia underperformed.
At the stock level, the top five performers were MediaTek, Delta Electronics, Trip.com, Alchip and TSMC. The foremost detractors were concentrated around technology – Alibaba and Samsung – while Thai Oil, Hero Motocorp and Bharat Petroleum also underperformed.
It was a quiet quarter in terms of fund positioning changes. Central Retail Corp was added to the portfolio while CP All and United Microelectronics were both removed. The fund maintains its overweight position in technology, which has continued to perform well as AI investment continues to flow through the Taiwanese technology names.
Outlook
We are cautiously optimistic on the outlook for Asia Pacific markets. It is yet to be seen how the election of President Trump will impact the region but the consensus expectation is that US tariffs could adversely affect export-driven economies in Asia.
We expect the economy in China to begin to stabilise as stimulus measures start to take effect and further measures likely continue to be announced.
Valuations in the Asia Pacific markets are currently comparatively cheap, with most markets other than India and Taiwan trading at a PE of 15 times or below. There are several markets in the region that continue to benefit from structural tailwinds, including India, though valuations there are high already.
Important Information
The value of investments may fall as well as rise and investors may not get back the amount invested.
Due to the underlying assets held in the WS Canlife Asia Pacific Fund, the price of the fund is classed as having above average to high volatility.
The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice.
This document is issued for information only by Canada Life Asset Management. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available in the literature section.
