The fast adoption of digital payments in China contrasts with a lack of pace in developed economies. A recent report by the ECB highlighted that eight in 10 payments in the eurozone are still made in cash. And with the exception of the UK and the Netherlands, contactless payments haven’t seen a significant uptake in Europe. In the US and Japan, contactless payment methods are almost completely absent.
“Tech is a big part of the Asian consumption story,” says Ayesha Akbar, a portfolio manager at Fidelity’s multi-asset franchise in London, who is also overweight the theme. “We expect the presence of tech will continue to grow over the next five to 10 years, especially in areas like artificial intelligence and robotics,” she adds.
However, Tubbs has been reducing his overweight to the Asian mega tech stocks as valuations have risen and trades have become more crowded.
“We are redeploying that into the smaller tech companies. At the beginning of the year we were 10% overweight mega tech. We still are overweight, but much less now as we have taken some profits,” he says.
Perhaps a focus on smaller tech companies could inspire a catch-up rally by EM small cap stocks, which have lagged their larger peers this year. And Mirabaud’s Tubbs may be right in saying Asian tech’s rise this year is justified due to long term growth prospects for the sector, but it would be worth keeping in mind the love of Chinese investors to chase high returns, creating stock market bubbles in the process.
It’s worth remembering that it’s only a little more than two years ago that the Chinese A-share market collapsed. It’s not unconceivable that the same investors who drove the rally back then are now going big in hot ‘consumer stocks’ like Alibaba and Tencent.