With inflation increasing across Asian and emerging markets in particular and talk of a bubble building in these sectors, you could be forgiven for reducing your exposure here in 2011. However, Asian markets in particular still provide a good investment opportunity, albeit with greater volatility, for sound underlying reasons.

 The status of the West as the creator of most of the world’s economic output and largest consumer of natural resources is already under challenge from the East. Changes in saving and consumption behaviours have contributed to this accelerating shift of global economic power eastwards, which is gathering pace due to the two billion aspirational Asians who, thanks to hard work and thrift, are rapidly moving up the income curve.

Meanwhile, across South East Asia, we are also seeing the transition from an export-led growth model to a more domestic-focused one, with a number of high growth economies developing the corporate culture of paying a stable dividend income.

Standard Initial Charge............5%

Thomas Heald Discount...........5%

Newton Asian Income Fund

My pick for the Asian market for 2011 is the Newton Asian Income fund, which focuses on tapping into those growing corporate earnings and growing dividend streams, which are such an important part of the returns investors receive from an equity investment, especially in a low return world! 

The fund invests predominantly in the Asia Pacific ex Japan region, Investing in developed countries benefiting from the region’s growth such as Australia, New Zealand and Singapore, as well as in developing ones, such as China, Taiwan and Korea. It is currently underweight in China as it raises interest rates to combat inflationary pressures and has no exposure to Indonesia where inflation is prevalent. Its overweight positions are in Australia, Singapore and Taiwan.

The Newton Asian Income Fund passed its five-year milestone on 30 November 2010 and has a great track record with an experienced Asian equity team in charge. Over that period, the Fund has grown its dividend every year* by focusing on selecting stocks of efficient companies with good business models that pay a yield, and is now yielding 4.8% net.  This has translated through to strong total returns and the fund is now well placed for the future with a focused portfolio of about 45 stocks.

It appears on both my Top Twenty and also model portfolios, and is well worth consideration if exposure to this region appeals.

*Source: Lipper Hindsight as Dec 2010, pence per share (GBP income share class), based on dividends paid