Asia’s hidden gems: Three overlooked small Asian stocks
Nitin Bajaj, portfolio manager of Fidelity Asian Values, tells us where he'd put his money


My investment strategy is built on diligence, discipline, and patience. We look for good businesses run by competent management teams, available at a price that leaves us with a margin of safety. We, therefore, tend to avoid thematic investments, start-ups, highly geared companies, cyclical businesses earning peak margins and stocks on high multiples to earnings.
I focus on managing absolute risk and losing little money during market drawdowns, which should help compound returns at higher rates over the long term. As a result of this approach, the trust has a contrarian value tilt and is primarily invested in mispriced small and medium-sized companies that are the “winners of tomorrow” before they become well-known. Here are three examples.
Two Asian stocks to add to your portfolio
Yihai International (Hong Kong: 1579) is the largest condiment producer for Chinese soup-based hotpot cuisine that can be prepared at home, but is popular in the restaurant segment as well. Yihai is the main supplier of soup bases for Haidilao, a leading Chinese hotpot restaurant chain that relies on Yihai for nearly 80% of its domestic demand.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
While there is no doubt about current weakness in Chinese consumption, Yihai is a fundamentally sound business selling a staple product. It is gaining market share in both the business-to-business (B2B) and business-to-consumer (B2C) segments. It has a strong record of execution, is on a price/earnings (p/e) ratio of between 11 and 12, offers a 6% dividend yield and boasts a net-cash balance sheet. We feel it meets our criteria of good business, good management and a good price.
Surya Pertiwi (Jakarta: SPTO) is the leading distributor and manufacturer of sanitaryware in Indonesia, with over 3,000 dealers in its network. It is the exclusive distributor in Indonesia for the Japanese brand TOTO. The company has a 65%-70% domestic market share in sanitaryware and a 40%-50% market share in sanitary fittings. Given the nature of sanitary ware as a product – fragile and high-volume, but low-value – it is hard to transport over long distances and, therefore, this segment faces limited competition from Chinese peers.
Our research estimates that the Indonesian sanitaryware market could expand by 7%-8% in volume terms, supported by improvements in affordability. The current market penetration of sanitaryware in the country is 50%, which is quite low and provides a tailwind for demand. The stock offers a mid-teen percentage return on equity and is on a price-to-book value ratio of below one. The balance sheet has no debt.
China’s car-parts champion stock
Tuhu (Hong Kong: 9690) is a Chinese vehicle parts retailer that uses its app to direct car owners to its network of franchisee car repair shops. It is a difficult business but it is also light on capital and scalable, so companies that find the winning formula have high returns on capital and healthy long-term growth prospects.
Tuhu is the market leader in China, where organised vehicle parts retailing is still in its infancy. The management team is solid and the firm should be able to grow significantly in the next 10 years. It’s not a traditional value investment as it is an early-stage company with a net-cash balance sheet and the stock is on a forward p/e of 16, but we feel comfortable with our position.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Nitin Bajaj joined Fidelity in 2003 as a research analyst in London. After a very successful period in research, he became an Assistant Portfolio Manager in 2007 for the Fidelity Global Special Situations Fund in the UK. He subsequently moved to Mumbai in 2009 to manage Fidelity’s domestic Indian equity funds, before moving to Singapore in 2012 to manage the Fidelity Asian Smaller Companies Fund (SICAV). Since April 2015, he has also managed Fidelity Asian Values PLC utilising the same contrarian value philosophy and approach.
-
Reeves ‘looks at minimum UK shareholding' in ISA reform
On top of a rumoured £10,000 cash ISA limit, chancellor Rachel Reeves is reportedly considering adding a minimum UK shareholding requirement to the stocks and shares ISA
-
Rightmove: Asking prices rise by 0.3%, but increase is lower than typical for October
October saw asking prices grow by £1,165 on average, Rightmove says, but the increase is far below the usual autumn bump as the property market braces for next month’s Budget.
-
Albert Einstein's first violin sells for £860,000 at auction
Albert Einstein left his first violin behind as he escaped Nazi Germany. Last week, it became the most expensive instrument not owned by a concert violinist
-
Who is Rob Granieri, the mysterious billionaire leader of Jane Street?
Profits at Jane Street have exploded, throwing billionaire Rob Granieri into the limelight. But it’s not just the firm’s success that is prompting scrutiny
-
Emerging markets boast top-quality growth stocks at bargain prices
Opinion Lim Wen Loong, investment director at Ashoka WhiteOak Capital, selects three growth stocks where he’d put his money
-
Beware the bubble in bitcoin treasury companies
Bitcoin treasury companies are no longer coining it. Short this one, says Matthew Partridge
-
Klarna leads a financial revolution – should investors buy?
Klarna has ambitions to rewire the global payments system and has huge growth potential
-
New faces don’t solve old problems – why strategy also matters when it comes to investment trusts
Opinion Changing managers often fails to boost a trust’s performance, says Max King
-
How to profit from silver’s record rise
Silver often lets investors down, but there may now be room for further gains, says Dominic Frisby
-
Are venture-capital trusts worth investing in?
Venture-capital trusts are a tax-efficient way to invest in early-stage companies. But are they worth the risk?