Despite daily stock market moves of 5% or more in the region, Yeung said a sharp deterioration of corporates and their balance sheets had failed to take place.
This means valuations are very cheap for many companies, which have been indiscriminately sold off despite strong earnings per share, she added.
Last week Asian equities saw their first inflows in 12 weeks, which indicated risk-on might be coming back to the table, but the barrage of negative news surrounding the eurozone in the past few days is likely to have stalled that shift.
Yeung said a more serious policy response was required from Europe before markets would calm down for any sustained period, and added this was very frustrating for investors in Asian equities because corporates indicators were strong.
Another factor effecting stock markets in the region is the high proportion of investment held by foreign investors.
In the year-to-date Asia ex-Japan saw 13.7% of foreign outflows, compared to 19.7% in 2008. The markets which have seen the biggest outflows are China and Korea, while Thailand and Indonesia have seen the smallest outflows, Yeung said.
Chinese equities are perhaps the most attractive in terms of valuations, Yeung said, and to reflect that the Fidelity Emerging Asia Fund has an overweight position in the region.
Responding to crisis
The response to the current crisis from Fidelity’s Asia portfolio managers has been different to 2008 because the various portfolios are still almost fully invested, with much less of their funds in cash.
But the volatility this time round has been much more prolonged, Yeung said, and is worrying because there does not seem to be any solution in sight with regards to Europe.
She believes the long-term story in Asia is still intact, though and pointed to the fact China’s stock market (including Hong Kong) still only makes up 3% of the MSCI World index.
Goldman Sachs is among those that have been saying for a number of years that a rebalancing of the world’s wealth is due to take place; and by 2050 over 50% of global GDP will be in BRIC.
"How can that equate to only 3% of the world index?" she asked.
"Investors need to have 15-20% of their portfolios in Asia over the long-term, if not more, in order to tap into these changes.”
Echoing these comments is Donald Amstad, Aberdeen Asset Management’s fixed income product specialist, while he was speaking at Portfolio Adviser‘s Alternative Investment Breakfast in Jersey yesterday.
He was very bullish on the region, arguing that, while admitting that Asia is certainly not risk-free, credit ratings of the region as a whole are going up as well as those of individual countries – Indonesia and the Philippines, he says, are due an upgrade in the next 12 to 24 months.
As a share of global GDP, he describes Asia as "to big to ignore" and any allocation "has to be double-digit".
