By Aaron

Investment Process in Action: Asia

As our Senior Analyst, Aaron Armstrong, returns from his most recent investment trip, he reports back on the findings from his visits within the region.

Our investment process is based upon meeting holdings at least twice annually and visiting the regions to see first hand how the economies are developing.  After extensive preparation, I spent 3 weeks visiting 68 companies, of which 13 are current holdings in our Asia Fund.



Thailand was a key country for this trip. When we launched the fund, Thailand was facing twin challenges of uncertainty over the health of the king and political instability. Following the King’s passing in October 2016, the relatively smooth transition process, and a reduction in political noise, we have become more positive on the market.

In addition, I wanted to assess the business environment in the Philippines.  Since the arrival of President Duterte the focus has been on his crusade against crime and his controversial foreign policy repositioning with regards to the China and the USA. Duterte’s credibility as a leader capable of generating economic change was strengthened by the recent passing of an important tax reform bill in parliament, which will increase after-tax income for 98% of salaried workers. This was a key discussion point for meetings with companies exposed to the mass-market consumer segment.

Having spent time in both countries, there appears to be an interesting parallel emerging between Indonesia and the Philippines. Both countries recently elected presidents whose economic agendas and ability to execute them have faced heavy criticism, both elected candidates from outside the normal political circles, and both are now pursuing economic policies relying heavily on infrastructure investment. The only difference being that Indonesia is two years further ahead in the political cycle, with Jokowi three years in to his term in office versus Duterte, who has just completed his first year.

Source: CIA World Factbook
Source: CIA World Factbook



Our process seeks out companies well placed to take advantage of the long-term growth drivers in the region, such as demographics, as well as cyclical tailwinds from economic reform.

In the Philippines, I met our three holdings PureGold Price Club, a mass-market grocery retailer, Concepcion Industrial, an air conditioning manufacturer and Metropolitan Bank, one of the country’s largest lenders. All three had a positive outlook for the economy.


PureGold Price Club are the market leader and we see the tax reform increasing disposable income and so they should be a major beneficiary. They also operate a membership-shopping format, offering higher priced and imported goods to upper-middle class consumers. A critical component for us is their stronger corporate governance than competitors, which gives us further conviction in the investment case. Puregold is currently a holding in the Alquity Asia and Alquity Future World Funds.


Concepcion Industrial are a manufacturer of air-conditioning equipment and the domestic market leader. Competing with international players such as LG, Concepcion have grown their business by developing new revenue streams. For example, by linking up with Otis (elevator supplier) they are now offering “integrated building solutions” at the design stage of new building projects. They are also developing a consumer appliance offering under a licensing agreement with a global brand.


By meeting the companies and seeing their operations, I was able to gain a deeper understanding of both their capability and alignment of values, which are critical outcomes from our forward-looking ESG analysis. Interestingly, during the trip, there was major media coverage of a well known, large blue-chip Thai company, whose Chairman had been arrested following concerns about the firm’s unusual capital structure. The stock, owned by many international investors is a reminder of the need for thorough analysis of material non-financial factors.



I met 55 companies during my trip that are either on our watch list of future potential investments or as a cross check for our existing holdings. We often track companies for an extended period of time before investing, developing our investment thesis and ensuring we have transparency about the business and confidence in the capability and alignment of the management team.
From this trip, the potential new investment ideas that stood out were an Indonesian food company and two Taiwanese producers of health food products. We will continue to track the performance of these companies and conduct deeper analysis, before any potential additions to the portfolio.


Overall, this was a largely positive trip whereby both at the macro and stock level, for the majority of cases, I came away more optimistic on the current investment outlook. We maintain a high level of conviction in the investment case for the Asian region over the coming three to five years, and the findings of my trip have only added to our convictions.


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