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 (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.
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.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential and Standard Chartered. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.