Fund Spotlight: Digging beneath the headlines to find Asia’s stock-level opportunities

• Asia is more than AI: Taiwan and South Korea have led the rally on the back of the AI semiconductor cycle, capturing much of investors’ attention. However, underperforming markets such as China and India still offer company-specific opportunities that broad indices may overlook.
  
  
• Bottom-up selection is key: M&G combines proprietary research with a bottom-up investment approach, valuation discipline and a margin-of-safety framework to identify businesses where market expectations appear overly pessimistic.
  
  
• Looking beyond the crowded trades: The fund underweights Taiwan while overweighting China, Hong Kong and South Korea. Its overweight positions include HDFC Bank, UOB and KE Holdings, alongside off-benchmark holding Amcor, highlight the breadth of its opportunity set.
  
  
• A track record tested across cycles: Over the past one, three and five years, the fund has consistently outperformed both its benchmark and peer group on an annualised basis, while also outperforming in every calendar year since 2021.
  
  
• Downside discipline matters: The fund’s focus on intrinsic value and margin of safety helped cushion the 2022 sell-off. Its five-year maximum drawdown was -25.2%, compared with slightly more than 30% for both its benchmark and peer group.

Asian equities have been on a strong rally this year, but on the surface, much of the gains appear concentrated in one dominant theme: semiconductors and AI.

South Korea and Taiwan have been particular beneficiaries of the AI hardware cycle, supported by their leadership in memory chips, foundry capacity and advanced semiconductor manufacturing. Meanwhile, the broader Chinese equity market has been held back by concerns over the strength of policy support and the soft economic conditions. India, after a period of rich valuations, has also cooled as higher oil prices and tighter financial conditions weigh on sentiment.

This divergence is understandable. Asia is not a single market, and investors should avoid treating the region as a homogenous market driven by a single growth engine. The AI investment cycle is real, and Asia's role in it is critical. That said, the region's investment opportunity extends well beyond the headline semiconductor trade. Even in markets that have underperformed this year, such as China and India, there remains a wide range of company-specific opportunities where expectations are low, balance sheets are resilient and long-term competitive advantages remain intact.

That is where a bottom-up approach can add value. When markets treat entire countries, sectors or industries indiscriminately, stock prices can increasingly diverge from underlying business fundamentals. For a genuinely bottom-up, benchmark-aware manager, that dispersion is not simply a risk to manage — it is the raw material for alpha.

This is the opportunity that M&G (Lux) Asian A Acc USD seeks to capture: looking beneath Asia's headline growth themes to identify businesses whose long-term value may not yet be fully reflected in their share prices.

M&G (Lux) Asian Fund: Conviction built from the bottom up

M&G Investments may be less familiar to some Asian investors than other global asset managers, but its presence in the region has grown since it became an independent asset-management business following the demerger from Prudential plc in October 2019.

The M&G (Lux) Asian Fund is managed by David Perrett, who has led the strategy since 30 November 2019, alongside deputy fund manager Carl Vine.

The team's investment philosophy rests on four pillars.

• First, independent proprietary research. The team maintains a curated research universe of more than 500 Asia ex-Japan companies, allowing it to develop deep, long-term knowledge of individual businesses rather than relying primarily on external research or broad market narratives.
  
  
• Second, high conviction. Conviction takes time to earn. Rather than constantly rotating across an ever-changing universe of stocks, the team focuses its research efforts on a consistent group of companies and industry "clusters" that it knows well.
  
  
• Third, a recognition of fallibility. The team explicitly acknowledges that its investment theses can be wrong. It therefore requires a margin of safety before investing and applies an early-warning discipline once a position is established. Every core holding is supported by a written investment thesis that is continually tested against new information, helping to prevent "thesis drift".
  
  
• Fourth, an emphasis on risk rather than prediction. As the future cannot be forecast with certainty, the team does not attempt to make precise predictions about economic or market outcomes. Instead, it focuses on understanding the risks of owning each business and ensuring that the price paid provides sufficient compensation for those risks.

The result is an actively managed portfolio with meaningful differentiation from its benchmark. The fund held 77 stocks as at 31 July 2026, and portfolio turnover stood at 60.84% over the past 12 months. Compared with the 20–30% turnover typically seen among bottom-up Asia ex-Japan funds, this reflects active recycling of capital as the team's assessment of risk and reward changes, rather than a passive, buy-and-hold approach.

The fund's country and sector allocations are outputs of stock selection rather than top-down regional calls. Nevertheless, they provide a useful snapshot of where the team currently sees the most attractive risk-adjusted opportunities.

Figure 1: The fund underweights Taiwan while favouring China and Hong Kong

The most striking country allocation is a substantial underweight to Taiwan, almost half of which is attributable to the fund's underweight in Taiwan Semiconductor Manufacturing Company (TSMC). However, it should not be interpreted as a negative view of the semiconductor industry or TSMC's competitive position. Rather, the underweight is largely a function of the UCITS diversification rule, which limits exposure to a single issuer to 10%. TSMC is already at the fund’s maximum permitted weight, making the underweight relative to the benchmark more a reflection of positioning constraints than a lack of conviction.

The fund instead holds meaningful overweights to China, South Korea and Hong Kong. The China overweight reflects the team's continued conviction in selected domestic consumption and technology businesses. South Korea, meanwhile, provides exposure to the country's corporate-governance and shareholder-return reforms under the broader Value-Up initiative.

At the sector level, Information Technology remains the fund's largest exposure but is still meaningfully underweight relative to the benchmark. The difference is redirected towards Consumer Discretionary, Consumer Staples and Real Estate, where the team has identified individual companies trading below its assessment of intrinsic value. Examples include Chinese property-services and brokerage platform KE Holdings and regional hospitality operator H World.

Figure 2: The fund underweights Information Technology while overweighting Consumer Discretionary

The fund's largest holdings include several of Asia's mega-cap technology and financial franchises, but a clearer picture comes from how those positions are sized relative to the benchmark (Table 1).

TSMC remains the fund's largest holding at 10.5% of assets,  marginally above the 10% UCITS threshold due to market movements before the next portfolio rebalancing. On the other hand, HDFC Bank, United Overseas Bank and KE Holdings are held at multiples of their respective benchmark weights, while Amcor, a global packaging company with no benchmark representation, accounts for 2.7% of the portfolio.

These positions illustrate an important feature of the strategy. The fund does not need to find the next AI winner to generate alpha. It can instead deploy capital towards businesses where the market's expectations are more conservative and where its own research suggests the risk-reward balance is more attractive.

Table 1: The fund’s top holdings reveal its active positioning

Holdings	Sector	Fund	Benchmark	Difference
Taiwan Semiconductor Manufacturing	Information Technology	10.5%	15.1%	-4.6%
Samsung Electronics	Information Technology	8.0%	7.9%	0.1%
SK Hynix	Information Technology	5.7%	5.5%	0.2%
Tencent Holdings	Communication Services	3.1%	3.1%	0.0%
HDFC Bank	Financials	3.1%	0.7%	2.4%
Amcor	Materials	2.7%	-	2.7%
Alibaba Group Holding	Consumer Discretionary	2.6%	2.1%	0.5%
AIA	Financials	2.2%	0.9%	1.3%
United Overseas Bank	Financials	2.1%	0.3%	1.8%
KE Holdings	Real Estate	1.8%	0.1%	1.7%
Source: M&G Investments. iFAST Compilations. Data as of 31 Jul 2026.

A track record that has stood the test of different market conditions

The fund has slightly lagged its benchmark year-to-date (Figure 3), which is not surprising given the fund’s significantly lower exposure to Information Technology and the strength of the AI hardware trade this year.

More importantly, the strategy should be assessed over a full market cycle rather than through the lens of a single AI-driven year. As at 31 July 2026, the USD A Accumulation share class had outperformed both its benchmark and peer average over one-, three- and five-year periods. On a calendar-year basis, the fund has also outperformed its benchmark and peer average in every year since 2021 (Figure 4).

Figure 3: The fund has consistently outperformed its benchmark and peers over the past five years.

Figure 4: The fund has consistently outperformed its benchmark and peers in every calendar year since 2021.

The record before that period was less consistent, including underperformance in 2020. According to the manager, this was partly a legacy of the portfolio inherited from the previous manager. During the first half of 2020, the portfolio was still being repositioned away from a more traditional hard-value bias before the current bottom-up and style-agnostic process became fully established. That track record is worth highlighting because it demonstrates that the current investment process has been tested through very different market environments rather than simply benefiting from a single favourable style regime.

One of the clearest examples came in 2022. As global interest rates rose sharply and equity valuations compressed, particularly among high-growth companies, the fund's disciplined approach to valuation and margin of safety helped cushion the downside. Its loss was almost half that of both its benchmark and peer group. The rationale is straightforward: when investors pay less for a business relative to their assessment of its intrinsic value, there is theoretically more room for the valuation to absorb adverse surprises before permanent capital loss becomes a concern.

The fund's style-agnostic approach also reduces its dependence on any single market factor. Rather than building the portfolio around a particular growth, value or technology style, the team selects companies individually based on the relationship between price, business quality and risk.

This has translated into a five-year maximum drawdown of -25.2%, compared with slightly more than 30% for both the benchmark and peer group (Figure 5).

Figure 5: The fund delivered better downside protection over the past five years

Recommend M&G (Lux) Asian Fund as a core Asia allocation

The AI cycle may remain one of its most powerful growth engines in Asia, but it is unlikely to be the only source of returns. China’s consumer and internet companies, Indian banks, and Korean companies benefiting from the country’s value-up programme can also serve as meaningful long-term contributors to returns. For investors willing to look beyond the headline trade, the dispersion between market prices and underlying business value could be just as important — and that is where M&G believes its bottom-up approach can make a difference.

We recommend the M&G (Lux) Asian A Acc USD as a core allocation to Asia. Its valuation-conscious, style-agnostic approach provides a diversified way to participate in the region’s long-term growth by focusing on business quality, valuation and risk, rather than relying on any single investment theme.

For investors who already have substantial exposure to Asian equities through passive strategies, the fund can serve as a differentiated, high-active-share complement, offering greater exposure to stock-specific opportunities beyond benchmark constituents and dominant sectors.

For investors who have followed our recommendation on the Global X Asia Semiconductor ETF (HKEX: 3119) and already have exposure to Asia’s semiconductor and AI hardware cycle, the M&G fund offers a natural complement. Its broader investment universe and bottom-up approach provide access to opportunities across financials, consumer, real estate and other sectors, helping diversify exposure beyond the increasingly crowded semiconductor trade.

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.