Aberdeen Standard Asia Focus PLC

An update from our investment manager, Hugh Young - 30 November 2021

The emergence of the new Omicron variant has again underscored the fragility of the pandemic environment, re-introducing volatility to stock markets and a tightening of Covid restrictions across countries. Omicron has come just when we thought there was a positive turning point to the two-year pandemic. It is still early days yet, though, in understanding how the Omicron variant is transmitted, whether it spreads easily and fast and how deadly it is. New cases are rapidly emerging in many locations across the world, and this spread is very likely to continue. In Asia, we are seeing heightened vigilance from governments, and with some already tightening travel curbs. While we continue to monitor the Omicron outbreak closely, it is worth noting that vaccination rates today are far higher than when the delta variant surfaced, which should help keep severe case counts low.

Meanwhile, US-China geopolitical tensions will continue to drive China’s push for self-sufficiency, which in turn presents investment opportunities, whether in the domestic consumption sector, tech, or green energy. We continue to position our portfolio around structural growth themes such as these that will weather the near-term uncertainties.

Lastly, despite coronavirus-related disruptions, corporate earnings growth across Asia remains resilient for the most part, led in particular by the robust tech hardware sector. Vaccination rates are now accelerating across the region and should gradually lead to easing restrictions and further economic reopening. This would help mitigate inflationary pressures tied to near-term supply chain bottlenecks, albeit we are hearing more corporate updates around rising input costs and margin pressure. As stock-pickers, we remain focused on companies with pricing power and the ability to pass through cost pressures.