Asia is the world’s fastest-growing region, delivering half of all global GDP growth last year, with one-third coming from China alone.
The following two FTSE 100 stocks allow you to invest in the region, while benefiting from the security of a London listing. Both are available at bargain prices as well.
Standard Chartered
Standard Chartered (LSE: STAN) generates more than three-quarters of its revenues from Asia, but this has not always been a plus. It suffered its own annus horribilis in 2014, after getting caught up in the Asian credit boom and bust, while the commodity crash wiped out a whole year’s worth of profits, forcing out the group’s CEO, Peter Sands, and chair, John Peace.
The fightback is nicely underway, with the Standard Chartered share price up 30% in the last year, as profits rose and bad debts fell.
It is up another 3% today, as CEO Bill Winters said the £23bn group’s strategy of the last few years has created a “stronger and more resilient business”, as shown by a 16% increase in underlying profits in the third quarter to $1.2bn.
Return on tangible equity increased 160 basis points to 8.9%, while income climbed 7% to $4bn. The bank recorded “broad-based growth across all segments and regions”, but with particularly strong performance in private banking, and corporate and institutional banking.
Management also completed a $1bn share buyback, reducing the total issued share capital by 3.5%. Its common equity tier 1 ratio remains within its 13%–14% target range at 13.5%, having risen six basis points since 30 June.
All of which looks very promising, and belies its current lowly valuation of just 11.3 times forward earnings. Its price-to-book ratio is also priced to go at 0.6, well below the 1 typically seen as matching balance sheet assets.
Standard Chartered’s dividend is lower than some of the other high street banks, with a forward yield of 2.9%, although generously covered 2.9 times, giving scope for progression. It only restarted payouts in February last year, after a two-year hiatus, so we can expect that to continue rising.
City analysts now forecast a yield of 3.7% for 2020 and are optimistic about earnings growth, predicting 24% this year and 16% next. If the global economy slows, then Standard Chartered may take a hit, but otherwise it looks like a buy for those wanting exposure to fast-growing Asia.
Prudential
Insurer Prudential (LSE: PRU) has seen its share price drop 20% in the last six months, and it trades 3% lower than it did five years ago.
Things aren’t as bad as they look, because recent slippage was down to its long-awaited split with UK asset management division M&G, under which each now lists separately on the FTSE 100. Investors who held stock on 18 October received one M&G share for each Pru share they owned.
I think Prudential continues to offer strong growth prospects, as it looks to expand in the fledgling Asian insurance market, where a growing middle class are crying out for pension and protection products, and to build on its position in the US retirement field.
The £5.5bn group is worth investigating for its bargain valuation of just 9.7 times forward earnings, while its forecast yield of 3% is covered 3.3 times. Today, though, Standard Chartered holds the stage. I’d buy that first.
