Asian consumer and internet stocks are generally overbought and overvalued, according to Schroders’ Robin Parbrook.
The Citywire + rated manager, who is head of Asia ex-Japan equities, said there was a major tech theme driving this thinking.
Parbrook, who is lead manager on the $2.9 billion fund, made the comments in an investment outlook.
He said: 'Machines are increasingly replacing workers as industrial robots continue to simultaneously tumble in price and advance in intelligence.’
‘Decisions on where to locate manufacturing hubs are now based on proximity to the end market and where legal, tax, red tape and finance costs are most favourable.’
‘Asia - bar Hong Kong and Singapore - does not do well when it comes to ease of doing business. The days of Asia as the cheap workshop of the world are not sustainable,’ he added.
As a result, Parbrook said growth rates in Asia will likely disappoint over the coming years. ‘Sluggish investment and cautious consumers will mean that growth rates will be slower than historic levels,' he added.
Caution creeping in
Therefore, his team is cautious on overpaying for Asian consumer names, with many still trading on extremely high premiums. 'We are also wary of traditional labour intensive manufacturing businesses and commodity intensive industries,’ Parbrook added.
That will have significant implications for a region traditionally seen as both a source of cheap labour for manufacturing and having a young and rising middle class, according to Parbrook.
'The vertiginous drop in the cost of processing power, combined with the rise of “intelligent machines”, means many current jobs may become redundant,’ he said.
‘Our preferred areas for investment are globally competitive Asian industrial companies, select technology names, ASEAN and Indian retail banks, healthcare and some cheap Hong Kong and Singapore property companies,’ he added.
The Schroder ISF Asian Opportunities fund returned 40% in the three years to the end of November 2014. This is while its benchmark, the MSCI AC Asia ex Japan TR USD, rose 36.9% over the same period.