Elke Schoeppl-Jost Sees 4 Markets to Focus On -- Barron's Asia

By Isabella Zhong

The MSCI Asia Index has experienced plenty of ups and downs but is flat this year. Elke Schoeppl-Jost expects 2015 to continue to be a volatile year for Asia markets, but Deutsche Asset & Wealth Management's Asia Pacific Chief Investment Officer remains bullish on Asian stocks; investors just have to choose carefully, focusing on well-managed and high-quality companies while avoiding countries with high political risk, such as Thailand and Indonesia.

Schoeppl-Jost, who first fell in love with Asia as a student at Beijing Cultural and Language University, has been based in Hong Kong for the past seven years. The Austrian native was previously CIO at BEA Union Investment before she joined Deutsche, which manages $95 billion of assets in the Asia Pacific. Besides food, culture and language, Schoeppl-Jost sees striking differences between Asia and Europe also in their attitudes towards investing. "In Europe, people tend to buy into funds, let it go and not keep turning it over," she says. "Whereas here, people are way more hands on with money -- everyone's watching the index daily and punting stocks themselves."

Increased institutional capital and the expansion of interest beyond traditional targets of real estate and stocks have helped Asia markets mature in recent years. But despite the growing appetite for bonds and alternative assets, Schoeppl-Jost thinks 2015 calls for a stock-driven investing strategy. "With lower oil prices, I could clearly see that there could be increased interest for equities," she says, although she declines to discuss specific stock picks.

She sits down with Barron's Asia to discuss some markets she feels most upbeat about:

1. The Philippines:

"The Philippines has made political changes for the better. Demographics are very much in its favor, and, as an outsourcing center, it can bring back home a lot of talent to develop the country," Schoeppl-Jost says.

"It has also been very successful with building its gambling industry, and all of this will trickle back into domestic consumption." For example, U.S. gambling giant Caesars Entertainment (ticker: CZR) recently announced it is seeking a license to build a $1 billion casino in Manila, while Melco Crown Entertainment's ( 6883.HK) City of Dreams is slated to open later this year.

With a median age of only 23 years, the Filipino population stands out as one of the youngest in a greying Asia. The country is also expected to be the fastest growing among the six largest ASEAN countries, with the Asian Development Bank forecasting gross domestic product growth of 6.4%.

2. South Korea:

"Korea is definitely a stock-pickers' market. It has always been on a discount and it needs to be watched very carefully," Schoeppl-Jost says. "It has been looking very distressed recently, and has been hurt by the weaker yen," which give Japanese exports a competitive edge. And then there's the "chaebol discount" -- conglomerates that are typically family-controlled and often shunned by investors for not being shareholder-friendly enough.

Last month, the country cut interest rates for the second time in three months after experiencing four consecutive months of falling exports. Schoeppl-Jost says the extent to which accommodative monetary policy will help Korea's technology sector very much depends on the yen's future movements. But she sees consumer goods and tourism as clear beneficiaries of lower borrowing costs in Korea.

3. India:

Although the Sensex has already rallied nearly 20% since Prime Minister Narendra Modi's landslide victory in the May elections, Schoeppl-Jost still sees opportunities in India. "Even though there are a lot of people on the Street who say India is too expensive, I think it is probably the market with the highest likelihood of earnings reversions," she says.

The country's GDP growth has averaged a lackluster 4.9% the past two years, and this cyclical weakness depressed the bottom lines of many Indian companies. However, Modi's planned reforms are expected to lift economic growth, and analysts forecast average earnings per share for the Sensex to increase by 9.5% in the coming 12 months, and by around 18% in each of the two years following that. Among sectors, Schoeppl-Jost thinks infrastructure will outperform.

4. Macau:

China's crackdown on political corruption has rattled Macau's gambling industry, which contributes nearly half of the special administrative region's economic output. Casino operator Sands China's ( 1928.HK) stock has pulled back 22% since the beginning of the year, while Wynn Macau's stock ( 1128.HK) has fallen 20%.

However, Schoeppl-Jost sees a "longer-term story" in the gaming enclave. Once highly dependent on high-rollers, Macau has seen a broadening of its market, she says. "We are now coming to a stage where wealth has been going up and ordinary people are interested in coming for long weekends and day-time gambling." The trend will improve the quality of Macau's GDP, which is very healthy for the special administrative region in the long run. "It's the sustainability that matters."

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