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CROUCHING TIGER, HIDDEN TREASURE

It has been 20 years since the Asian financial crisis and the memory of the crash lingers on. However, a more open mind could lead to unexpected returns

Asset class analysis Asian equities

Whenever a sector or region goes through a traumatic period, it’s inevitable that investors should wonder if it will happen again. With this in mind, it seems incredible that July this year marked the 20th anniversary of the Asian financial crisis. A sharp fall in the Thai currency in early July 1997 caused a domino effect that tore through the region, with the Hong Kong market plunging 10% in one day and the Indonesian economy shrinking by 85% in the aftermath.

It was a crisis that dissuaded many investors from investing in the region for a long time. However, 20 years on, it could be argued that Asia looks more stable, both politically and economically, than much of the developed world, suggesting that lessons have been learnt.

Hard lessons

For the uninitiated, Matthew Dobbs, fund manager of Asian equities and head of global small cap at Schroders, explains that the origins of the crisis stemmed from the popularity of what he terms an arbitrage trade.

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About Expert Investor

Nine years after the collapse of Lehman Brothers, we ask fund selectors which lessons they have learnt from the financial crisis and how it has changed their jobs. We also answer the question whether it makes sense for asset allocators to use multi-asset funds. Last but not least, there are profile interviews with Alessandro Viviani, fund analyst at Old Mutual Wealth in Milan, and Matt Shafer, head of global distribution at Natixis AM.
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