Bruce MacDonald, portfolio manager of Fidelity Far East Fund, provides an outlook on Asian equity markets and where opportunities can be found overseas. Bruce believes there are two things that make Japan and Asia-Pacific more attractive than developed markets. First, the combined stimulus seen in these regions. The stimulus is 35% of GDP in developed countries, but only about 8% of the GDP of Japan and 4% of China’s GDP, resulting in much less of an impact on the economy. Second, the causalities of low interest rates. These have led to “zombie companies” – companies that are barely kept alive, making enough capital to service their debt, but not enough repay their debt. These zombies have a huge impact on capital, because they make an economy inefficient and will likely not generate growth.
Recorded on November 25, 2020.