Asia not as volatile as it seems

Many investors think Asia is a risky place to invest but it's not as volatile as commonly believed, according to a fund manager who specialises in the region.

Monday, October 15th 2012, 6:00AM

by Niko Kloeten

Jonathan Wu of Premium China Fund Management, who will be speaking at the Meet the Managers forum this month, said it's a common belief that Asia is the investment equivalent of the Wild West.

He said the attitude of many in the Western financial community is that investing Asia involves "high capital gains and you cop the volatility on the way through".

Wu said Asian sharemarkets are moderately more volatile than their Western counterparts, at around 20% volatilty compared to 16% in Australian equities.

However, he pointed to a way investors can get exposure to Asian economic growth without so much volatility: by investing in Asian debt markets.

For instance, he said Premium China's Asian Income Fund had achieved a 16.5% return in the past year on volatility of less than 7% with no "gearing, shorting or funny business", just investment in Asian corporate and sovereign bonds.

"One of the big things we preach is if we look at investment-grade debt in Asia, when was the last time an investment-grade bond defaulted? There have been no investment-grade defaults since 1997," Wu said.

Asian sovereign debt is a similar story; he compared Sri Lanka, which has never had a sovereign default and is paying a yield of 4.75%, to Greece, which has had seven defaults in the past 200 years.

Wu spoke to Good Returns before embarking on his company's annual tour to China, which he said would allow attendees to witness the pace of the country's growth for themselves.

"The speed of development over there is mind-boggling; it changes literally year on year. Every year you see new towers. When you compare a city like Sydney to what it was like ten years ago it didn't look much different to today.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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