Merryn Talks Money – "Diversification Play: Why It's Not Too Late to Buy Asia"

Host: Merryn Somerset Webb (Bloomberg)
Guest: Fiona Yang, Portfolio Manager, Invesco Asia Dragon
Release Date: February 23, 2026

Episode Overview

This episode dives into the evolving role of Asia in global investment portfolios. Merryn Somerset Webb interviews Fiona Yang, who manages an Asia equity fund (excluding Japan), to explore how and why international money is increasingly rotating from the US and other developed markets into Asian equities. The conversation covers the diversity within Asian markets, challenges such as demographics and geopolitics, sector opportunities, Fiona's contrarian, valuation-driven investment approach, and the case for continued Asian diversification—despite higher valuations and macro uncertainties.

Key Discussion Points & Insights

The "Rotation" to Asia: What’s Behind the Trend?

• 2025 as a Year of Rebalancing ([03:30])
  • Fiona attributes recent Asian outperformance to a weak US dollar, Asian central bank rate cuts, and Asia’s leadership in the global AI revolution.
  • Quote: "2025 was a year of rebalancing... the central bank in Asia basically cutting interest rate to try to stimulate economic growth. That just attracted a lot of immensely attention. Combined with Asia such as Taiwan and Korea being the engine behind the global AI revolution..." — Fiona Yang ([03:30])
• Investors increasingly want to diversify away from US assets and into Asia for earnings growth and valuation upside.

Asia: Not One Market, But Many

• Merryn and Fiona debunk the "Asia = China and the rest" misconception ([04:48]).
• Key regions:
  • India: Strong GDP growth, unique investment opportunities
  • Southeast Asia: Benefits from manufacturing shifting out of China (“China Plus One”)
  • Tech leadership: Asia is the “uncontested leader” in memory/foundry chips

Japan’s Regional Role and Spillovers

• Mild impact from Japan’s changing political priorities—Fiona focuses more on currency/tech competition between Korea and Japan ([06:31]).
• Chinese tourism to Japan has slowed, affecting the service sector but with manageable impact.

Demographics: From Growth Engine to Headwind

• Aging and falling birthrates are shaping new macro trends ([07:46]).
  • Quote: "The incentives the government has introduced for them to have two babies or even three kids is just not enough... So this structural trend is undeniable." — Fiona Yang ([08:49])
• Policymakers are pushing for higher-value-added industries, automation, robotics, and targeting retiree spending.
• “Silver economy” investments (retiree services, education, hospitality) are rising.

Investment Philosophy: Contrarian, Valuation-Driven, Long-Term

• Three pillars ([11:02]):
  1. Valuation discipline: Buying undervalued, mispriced stocks, especially when market fear is high.
  2. Long-term holding: 3–5 year horizons, patience through volatility.
  3. Contrarian/capital cycle approach: Seeking sectors/countries out of favor for higher future returns.
  • Quote: “The power of staying in the seat, understanding the stock level drivers behind a single company.” — Fiona Yang ([12:35])
• Example: Holding Chinese gaming company NetEase for a decade through volatility, benefiting from multi-bagger gains.

Stock Selection: Narrowing the Massive Asian Universe

• Focus on places other investors avoid (e.g., China during periods of negative sentiment; [13:40]).
• Looks for global leaders undervalued vs. peers (example: H World Hotels in China, a "leaner, higher-margin" company post-COVID).

Income & Dividends in Asia

• Asia traditionally seen as “growthy” with low dividends, but there’s a shift ([15:20]):
  • Policy changes (e.g., Korea’s "Value Up" campaign) are incentivizing greater shareholder returns.
  • Trust pays a 4% yield (mix of dividends + capital), attractive especially for investors requiring regular income.

Market-Specific Deep Dives

China

• Remains a key but nuanced opportunity; no longer as deeply undervalued but plenty for "bottom-up" pickers ([20:13]).
  • Growth in robotics, electric vehicles, AI, consumer experience sectors.
  • Real estate crisis is positive in the sense that it's being managed early versus allowing a full bubble to form ([21:29]).
  • Shift in consumer savings from property to experiences and products.
  • Quote: "It's just amazing to see some of the robotics company...look at the EV company...in terms of products, in terms of their costs." — Fiona Yang ([20:13])
  • Cautiously watching for signs that the consumer boom is materializing ([24:53]).

Korea

• Corporate governance reform and memory chip cycle led to a dramatic 2025 rally ([27:53]).
  • The “Korean discount” is shrinking due to better shareholder returns and government action ([28:30]).
  • Memory chip sector is now an oligopoly; tight supply and AI demand means profits but valuations are no longer as cheap ([27:53]).
  • “We just take some profit off the table.”

Taiwan

• AI boom centered in Taiwan, led by TSMC ([30:59]).
  • Heightened expectations and pricing make the team cautious; overweight select companies, but valuations less attractive across the board.
  • Geopolitical uncertainty (China–Taiwan tensions) is a “constant risk” but diversification (TSMC building capacity overseas) helps mitigate ([32:07]).
  • Quote: “If anything happened to Taiwan...Chinese market could effectively go to zero in our index. So that's a risk we constantly discuss.” — Fiona Yang ([32:13])

India

• Market is generally expensive, so they remain underweight ([33:55]).
  • Still, selective financial stocks—like non-bank lender focused on rural SMEs and “gold loans”—offer value ([37:25]).

Southeast Asia & Vietnam

• Southeast Asia benefits from supply chain diversification ([40:38]).
  • Countries like Thailand, Indonesia, Vietnam are attractively valued and well-positioned for sustained growth.
• In Vietnam: Opportunities in IT services and consumer staples, but constrained by foreign ownership limits ([39:08]).

Currency & Macro Risks

• Asia currencies relatively stable versus each other—key risk is US dollar strength ([35:26]).
• Portfolio companies’ revenue/costs are often matched domestically or in US dollars, mitigating some of the impact.

Key Portfolio Risks & Worries

• Valuations getting ahead of fundamentals, especially in sectors with AI-fueled hype ([33:38]).
• Balance sheet strength: Preference for low-debt, resilient companies ([34:37]).
  • Quote: “I do see debt as a heavy backpack. When the road is flat, anyone can carry it. When you hit a hill, really the one with the heavy debt can be dragged down.” — Fiona Yang ([34:37])
• Diversification: Ensuring the portfolio isn’t overly driven by a single theme (e.g., AI cycle).

Notable Quotes & Memorable Moments

• On Asian diversity:
  "One of the biggest misconception about Asia is this is China and the rest. But reality...there are so many different countries, therefore different sectors within Asia." — Fiona Yang ([04:48])

• On demographic change:
  "Instead of trying to cater to the kids, now everyone is trying to sell say the hospitality industry as well as even retiree education, re education industry. All of this are gaining more traction in Asia." — Fiona Yang ([09:44])

• On staying patient:
  "If you hold onto the stock over the past 10 years it's pretty much has gone through a lot of volatility...But market cap has grown over six times. That just shows the power of staying in the seat." — Fiona Yang ([12:35])

• On valuation risk:
  "You don't want to be the last one to buy the hype." — Fiona Yang ([33:55])

• On real diversification:
  "Asia do offer a cheaper alternative. Getting you access to a vast region of different countries and different sector exposure is real diversification. Not just another picker." — Fiona Yang ([42:17])

Segment Timestamps

• [02:41] — Fiona’s macro view: Why capital is rotating into Asia now
• [04:48] — Misconceptions: China isn’t “all of Asia”
• [07:46] — The demographic headwind and how Asia is adapting
• [11:02] — Fiona’s 3-pillar investment approach
• [13:40] — Finding value in “unloved” markets and companies
• [15:20] — The rise of dividends and shareholder returns in Asia
• [20:13] — Specifics: China – opportunities, challenges, and changing consumer habits
• [27:53] — Korea: End of the “Korean discount” and the memory chip story
• [30:59] — Taiwan, AI, and geopolitical concerns
• [33:38] — Key risks: valuation, debt, staying diversified
• [35:26] — Managing currency risk
• [37:25] — Opportunities in India’s financial sector
• [39:08] — Vietnam, Southeast Asia, and the supply chain shift
• [41:44] — Big picture: Rotation toward Asia, risk of US concentration
• [42:17] — Real diversification for investors

Takeaways

• Asia remains an essential diversification play, but investors must be selective—valuations are higher than 1–2 years ago, but are still compelling versus the US and Europe.
• The region is extremely diverse—country, sector, and company selection is key.
• New macro challenges (demographics, geopolitics) are spurring innovation and shifting opportunity sets.
• A disciplined, patient, and contrarian approach is vital; overpaying for hype is a key risk.
• Real diversification means looking beyond China, recognizing where true value and long-term growth exist.

Final Thought:
Fiona’s message is clear: “Check your home bias”—Asia offers opportunities you can no longer afford to ignore, and despite the region’s higher profile, it’s not too late for discerning, long-term investors to benefit.