What are the most important themes currently developing in Asia?
Changing consumption is currently the chief theme in Asia, not exports or investment. However, investors need to understand that a more broad approach to Asian markets is necessary to seize the vast upside potential available.

Asian consumption is certainly not purely focused on just shopping; there are a plethora of other important markets to consider. Healthcare is a large beneficiary of the changing consumption landscape. When a person goes to the hospital for medical treatment, they are spending capital. The increasing wealth and age of Asian populations translates into strong demand for quality medicines and treatments. When they purchase a property, they are utilising financial services. A key trend throughout this theme is the advancement and availability of technology which has created new consumption possibilities; people are now using the internet, their smartphone and apps to access goods and services.

Tourism is another sector that is rapidly evolving, a huge number of Chinese consumers have now reached an income threshold that makes tourism not only viable but a requirement. Currently only 5 per cent of Chinese people hold a passport but this figure is set to rise at a rapid rate as consumers expand their horizons on the back of increased spending power.

Is the Mirae Asset Asia Great Consumer Equity Fund overweight in any sectors and regions, if so, which and why?
In terms of regions, we are currently bullish on India, China, the Philippines and Indonesia. India struggled in the first half of 2015. However, the government achieved notable policy achievements including the auctioning of mining blocks, positive progress towards institutionalising the economy and a large financial inclusion plan. Therefore, I believe that the economy should revive in the near term off the back of increased government expenditure and interest rate cuts by the central bank.

I firmly believe that the recent pessimism surrounding China is not warranted, although a growth recovery is required to justify additional market upticks. The Philippines is a stand-out country with strong demographics and an English language advantage over other Asian countries; I expect growth rates to rebound back to around 5.5 per cent to 6 per cent. Another country that I am bullish towards is the medium term potential offered by Indonesia, although there is an obligation on the government to kick start the investment cycle via infrastructure spending.  

From a sector standpoint, I am particularly favourably inclined towards e-commerce and the internet, healthcare and tourism. Although these are not traditional consumer sectors, they naturally represent the changing nature of consumption in Asia. My personal opinion is that these consumer-related sectors often are less susceptible to macro downturns. In particular, healthcare is an integral, fast-growing section as part of the social security theme.

How have consumption trends in Asia changed in recent years?
The most fundamental change to the Asian consumer has been through the evolution and development of technology. But, in the same vein as other structural trends like urbanisation and demographics, the catalysts of the technology theme vary from market to market. For example, China's internet ecosphere has evolved differently to elsewhere as the traditional Western global giants have struggled with regulation, language and cultural preferences.

Alibaba, Tencent (through its QQ social network service) and Baidu continue to dominate the Chinese market. These firms are also strategically placed to exploit the transfer to mobile devices, to monetise online gaming and other web-based services. However in India, the situation is completely different, the top visited websites are all large Silicon Valley/Western names. Facebook, Google, YouTube and Yahoo dominate, as the English-speaking population has enabled them to secure substantial market share early.

Does your investment strategy vary across the different Asian countries/markets?
Many Southeast Asian markets are still under-penetrated and there are certainly still good stocks to be found in the consumer necessities and basics. Staples offer interesting opportunities in the Philippines, Indonesia and Thailand. However, in Northern Asian markets, including China, consumers are moving up from necessities such as clothing and food to the next stage of consumption. The "subsistence" growth trend is being surpassed by the "desire" trend in China, Taiwan, and Hong Kong. We see newer, interesting opportunities arising in tourism, hospitality, e-commerce and Internet in those markets as a result.

But North and South Asia are similar when it comes to a purely cultural theme. For example, favourite foods remain the same; local is always preferred. As such, local companies always have a significant advantage over global food companies. The majority have been present in their respective markets for longer, know a substantial amount more about their loyal customer bases, as well as having an inherent understanding of what actually appeals to an Asian consumer.

Do you invest in mainland China and if so, how do you do this? (Via Hong Kong's equity market, other)?
Yes, we invest in mainland China through investing in H-shares.

What sort of metrics do you use to measure firms' attractiveness? (P/E ratios; price/book, free cash-flow, other)? Are you more of a growth/value investor or do you take another approach?
When measuring a company’s attractiveness, we believe that investing in companies with sustainable competitiveness best captures the growth opportunities while managing long-term risks. Whether a company maintains or gains sustainable competitiveness and sustainable earnings growth are key to the strategy’s buy and sell discipline. Sustainable competitiveness can depend on a number of factors, such as the structural environment of the country, economy, industry and market while earnings growth will depend on a company’s technology / service / brand power, exclusivity, earnings sustainability and management quality issues.

At Mirae Asset, we adopt a proprietary scoring methodology, the Sustainable Competitiveness Scorecard (“the Scorecard”), which is a tool to identify quality companies with long-term sustainable competiveness through fundamental stock picking. The Scorecard assists in analysing companies in six different areas, namely barriers to entry, competitive dynamics, sustainability of returns, management track record, reliance on outside support and ownership of distribution / production chain. Each area is crucial in identifying stocks with high growth potential. There are a total of 30 factors under these six areas that an individual stock is scored on.  

Additional multi-faceted analyses of stocks are also performed during this stage, including valuation analysis, to ensure that the price of the stock is reasonable, and a risk assessment, which considers factors such as company-specific risks, policy risks and the possibility of negative events and overhangs. Our style of approach can be broadly categorised as GARP i.e. growth at reasonable valuations.

Are you primarily a bottom-up investor or do you also adopt a top-down view? Or is this is a bit of both? Do you have any broad views about the region and its prospects?
It is a mix of both. We believe that macro is just noise 80 per cent of the time. However, during the other 20 per cent macro can have a meaningful impact on the growth rates of a company. Nevertheless, we normally do not act upon macroeconomic factors.

As a firm, Mirae Asset takes a fundamental, bottom-up approach to identify quality stocks that will achieve sustainable, long-term growth. A significant amount of the time is spent on meeting with companies, doing channel checks and finding the best micro stories, which are in line with our investment philosophy of buying good companies and businesses.

We are positive on healthcare as millions in China and India continue to suffer from chronic ailments like diabetes, cancer, stroke and cardiovascular diseases because of sedentary lifestyle, environmental pollution and food contamination.

We like internet companies as a harbinger of new technology trends where users graduate beyond sharing pictures, playing games to doing more offline activities like shopping, booking taxis, movies and restaurants online.

Finally, insurance is a good way to invest in rich Asian consumers in China, Hong Kong and Singapore who are living longer and need to save for retirement and their kids’ education. Retail banks in India, Indonesia and Philippines also provide exposure to millions of underleveraged consumers who dream of owning a house and a car.

What sort of approach do you take in managing currency exposure?
Currency is an integral part of our investment process. For example, in a period of dollar strength against regional currencies, we would be extra cautious towards companies with high dollar debt.