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 Asia Pacific Leaders Sustainability

Asia Pacific Leaders Sustainability

The Asia Pacific Leaders strategy invests in large and mid-sized companies which generally have a total stock market value of at least US$1 billion. 

The Asia Pacific Leaders strategy was originally launched in December 2003 and invests in large and mid-sized companies which generally have a total stock market value of at least US$1 billion (hence ‘Leaders’).

This equity-only strategy seeks to invest in between 30 to 60 high-quality businesses in the Asia Pacific region (including Australia and New Zealand, but excluding Japan) that are helping bring about a more sustainable future.

Strategy highlights: a focus on quality and sustainability

  • Companies must contribute to sustainable development and make a net-positive impact to a more sustainable future. Portfolio Explorer >

  • We invest in high-quality companies with exceptional cultures, strong franchises and resilient financials. How we pick companies >

  • We avoid companies linked to harmful activities and engage and vote for positive change. Our position on harmful products >

  • Our approach is long-term, bottom-up, high conviction and benchmark agnostic

  • We focus on capital preservation as well as capital growth – we define risk as the permanent loss of client capital

Latest insights

Strategy update: Q4 2022

Asia Pacific Leaders Sustainability strategy update: 1 October - 31 December 2022

Renewed investor interest in Chinese equities challenged performance in the last quarter of 2022.

This was caused by government policy backtracking in the property and internet sectors, and the sudden end of the zero-COVID policy. The CSI 300 Index, a broad measure of Chinese equities, rebounded by 13% in local terms and was one of the strongest performers in the region1. We have no ability to predict changes in government policy and it has not changed our opinion about the quality of any of the companies held in the strategy.

Well-documented, top-down concerns about Chinese growth created the opportunity to add to a few of our mainland-listed companies (Glodon: Information Technology – software for the construction industry; Kingmed Diagnostics Group: Health Care – independent diagnostic laboratories; Shenzhen Inovance Tech: Industrials – Industrial Automation) as well as Silergy Corp (Information Technology), a Taiwanese-listed designer and manufacturer of analog semiconductors with material exposure to China.

During the quarter we visited Japan and South Korea. Disappointing meetings with Nippon Paint (Japan: Materials) and Naver (South Korea: Communications Services) prompted the complete sale of both companies as we failed to build conviction in quality and sustainability positioning. We also sold Amoy Diagnostics (China: Health Care) after a reappraisal of the liquidity of the shares.

For valuation reasons we reduced Delta Electronics (Taiwan: Information Technology), Advantech (Taiwan: Information Technology), Dabur (India: Consumer Staples) and Tata Consultancy Services (India: Information Technology). To control the position size we trimmed Mahindra & Mahindra (India: Consumer Discretionary).

Proceeds from these transactions provided an opportunity to initiate a position in ResMed (United States: Health Care), a global leader in sleep and breathing solutions, and technology which helps people with sleep apnoea and respiratory diseases.

1 Source: Bloomberg

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.

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Stewart Investors Quarterly Client Update Q4 2022

1 October - 31 December 2022

Investment philosophy

  • We are stewards: Our role is to allocate society’s capital to productive uses, in accordance with our Hippocratic Oath
  • We are long term: Our time horizon is measured in years, not weeks, and we value companies accordingly
  • We invest only in companies contributing to a more sustainable future: We engage constructively as owners to help companies on their sustainability journeys
  • We invest only in high-quality companies: We seek out companies with exceptional cultures, strong franchises and resilient financials
  • We believe capital preservation is important for capital growth: We define risk as the possibility of the permanent loss of client capital

Investment objective

To generate attractive long-term, risk-adjusted returns by investing in the shares of high-quality companies that are particularly well positioned to contribute to, and benefit from sustainable development.

Important information

Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of Stewart Investors’ portfolios at a certain point in time, and the holdings may change over time. 

Important information

The information contained within this material has been obtained from sources that First Sentier Investors (“FSI”) believes to be reliable and accurate at the time of issue but no representation or warranty, expressed or implied, is made as to the fairness, accuracy, completeness or correctness of the information. To the extent permitted by law, neither FSI, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from any use of this. This material is intended solely for distribution to professional/institutional investors as may be defined in the relevant jurisdiction and is not intended for distribution to the public. The information herein is for information purposes only; it does not constitute investment advice and/or recommendation, and should not be used as the basis of any investment decision. Some of the funds mentioned herein are not authorised for offer/sale to the public in certain jurisdiction.

The value of investments and the income from them may go down as well as up and you may not get back your original investment. Past performance is not necessarily a guide to future performance. Please refer to the offering documents for details, including the risk factors.

Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of Stewart Investors’ portfolios at a certain point in time, and the holdings may change over time.

Some of the information in this document has been compiled using data from a representative strategy accounts. This information relates to existing Stewart Investors strategies and has been provided to illustrate Stewart Investors’ expertise in the strategies This material is provided for information purposes only and does not constitute a recommendation, a solicitation, an offer, an advice or an invitation to purchase or sell any fund and should in no case be interpreted as such. The distribution or purchase of shares in any funds, or entering into an investment agreement with First Sentier Investors or Stewart Investors may be restricted in certain jurisdictions.

This material and the information contained herein may not be reproduced in whole or in part without the prior consent of FSI. This material shall only be used and/or received in accordance with the applicable laws in the relevant jurisdiction.

In Hong Kong, this material is issued by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. In Singapore, this material is issued by First Sentier Investors (Singapore) whose company registration number is 196900420D. This advertisement or material has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors and Stewart Investors are business names of First Sentier Investors (Hong Kong) Limited. First Sentier Investors (registration number 53236800B) and Stewart Investors (registration number 53310114W) are business divisions of First Sentier Investors (Singapore).

First Sentier Investors (Hong Kong) Limited and First Sentier Investors (Singapore) are part of the investment management business of First Sentier Investors, which is ultimately owned by Mitsubishi UFJ Financial Group, Inc. (“MUFG”), a global financial group. First Sentier Investors includes a number of entities in different jurisdictions.

MUFG and its subsidiaries are not responsible for any statement or information contained in this material. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment or entity referred to in this material or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.

© First Sentier Investors 

Strategy update: Q3 2022

Asia Pacific Leaders Sustainability strategy update: 1 July - 30 September 2022

Top-down macroeconomic headlines continue to dominate Asian markets with manic swings in sentiment based on the reading of central banks' policies, economic data and geopolitical narrative.

Our focus on owning a portfolio of high-quality, resilient franchises run by long-term competent owners, as well as our understanding that we add little value in the forecasting of macroeconomic events, meant there were minimal changes to the portfolio over the quarter.

The position in OCBC Bank (Singapore: Financials) was increased as we believe the bank to be extending its lead as the most forward-thinking bank in the region when it comes to incorporating sustainability-thinking into its operations. These decisions manifest themselves in many ways, from improving the quality of their balance sheet to gaining exposure to leading companies in sectors that enjoy attractive structural tailwinds from sustainable development. 

We exited our holdings in both Estun Automation (China: Industrials) and Chroma ATE (Taiwan: Information Technology). Although we believe Estun to be well positioned to benefit from the growing investment in automation in China, valuations more than reflected this growth opportunity. Chroma was sold as we failed to build conviction to take it from a marginal position in the tail of the portfolio. Similar to Estun, the position in Pidilite Industries (India: Materials) was trimmed as extended valuation levels reduced the opportunity for attractive long-term returns.

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.

Strategy update: Q2 2022

Asia Pacific Leaders Sustainability strategy update: 1 April - 30 June 2022

The second quarter of 2022 was extremely volatile and mostly weak for equities.

Inflation is less acute in Asia, and while regional equities did not fall as much as global peers, they are down around 10% in USD terms1 according to broad measures. Investor fears of recession, aggravated by war in Ukraine and increasing commodity prices, appear to be rising. Within this context our philosophy and process stayed exactly the same and we added to high-quality companies at attractive valuations.

During the second quarter, we increased the position size of three existing holdings. The first was OCBC Bank (Singapore), an excellent financial services franchise in Singapore, Malaysia, Indonesia and Greater China, stewarded by the Lee family. The second was Shenzhen Inovance Tech (China), an innovative engineering company with strong sustainability tailwinds. The third was Public Bank (Malaysia), one of the finest banking franchises in Malaysia and an indirect beneficiary of rising commodity prices.

We did not add any new companies during the period. But we note, with anticipation, an increasing number of high-quality franchises with good prospects at more enticing valuations.

Not all equities in the region fell. We trimmed Mahindra & Mahindra (India) and Tata Consultancy Services (India), two of the strategy’s largest holdings, to control position size. We also reduced Altium (Australia) for reasons of valuation.

We sold Hualan Biological Engineering, having re-evaluated the quality of the franchise amidst a more competitive landscape. 

1 Source: Bloomberg

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.

Strategy update: Q1 2022

Asia Pacific Leaders Sustainability strategy update: 1 January - 31 March 2022

We invested in a bank in Malaysia during the quarter. Under the excellent stewardship of founder/owner, Teh Hong Piow, the bank has thrived through adversity and crisis for over fifty years. 

This bank has the highest-quality operating metrics in the country and has one of the most respected track records in Asia. Like all countries, the Malaysian economy has struggled with COVID-19 but the country is blessed with a broad range of natural resources which are now rising in price. This should strengthen the economy, provide more profitable lending opportunities for the bank, and is likely to improve returns on capital from historically low levels. We have been adding to our initial investment in the bank throughout the quarter. We also topped up holdings in HDFC (India), Kotak Mahindra Bank (India) and Techtronic Industries (Hong Kong) on share price weakness. 

We revised our assessment of quality at Xero (Australia) and Biocon (India), resulting in the sale of both companies from the portfolio. Our primary concerns are growth challenges at Xero and slow franchise development at Biocon. In addition to these sells, we trimmed holdings in Delta Electronics (Taiwan) and Advantech (Taiwan), where we believe the company valuations implied more growth than the franchises are likely to deliver in the medium term. We also reduced Hoya (Japan) which manufactures components used for making semiconductors. The semiconductor industry is nearing a cyclical high and faces intensifying sustainability headwinds which may challenge Hoya.

We also reduced Hualan Biological Engineering (China) on growth concerns, Unicharm (Japan) to control position size, and despite topping up Kotak Mahindra Bank (India) earlier in the quarter, we later reduced our holding to finance an increase in the position size of the new holding in Malaysia. Lastly, we reduced the holding in Dr. Reddy’s Laboratories (India) over uncertainty about their operations in Russia. These operations only account for approximately 8% of sales for Dr. Reddy’s, but the company might face increasing challenges as the Russian war with Ukraine continues.

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.

Proxy voting: Q4 2022

Asia Pacific Leaders Sustainability proxy voting: 1 October - 31 December 2022

Proxy voting by country of origin

Proxy voting by proposal category

During the quarter there were 53 resolutions from 11 companies to vote on. On behalf of clients, we voted against three resolutions.

We voted against the approval of CSL's remuneration report and the equity-based remuneration of the CEO. We believe their remuneration focuses on the shorter term rather than the longer term, and the absolute level of CEO pay, and the gap between median pay, is excessive. (two resolutions)

We voted against the election of a director to the supervisory board at Foshan Haitian Flavouring as we do not believe they are truly independent. (one resolution)

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.

Proxy voting: Q3 2022

Asia Pacific Leaders Sustainability proxy voting: 1 July - 30 September 2022

Proxy voting by country of origin

Proxy voting by proposal category

During the quarter there were 111 resolutions from 17 companies to vote on. On behalf of clients, we voted against two resolutions. 

We voted against the election of a director at Dabur as we do not believe they are truly independent. (one resolution)

We voted against the election of the chairman of the audit committee at Vitasoy as the committee met less than four times during the last fiscal year. (one resolution)

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.

Proxy voting: Q2 2022

Asia Pacific Leaders Sustainability proxy voting: 1 April - 30 June 2022

During the quarter, there were 276 resolutions from 29 companies to vote on. On behalf of clients, we voted against eight resolutions. 

We voted against Amoy Diagnostics’ request to transfer product rights and equity to a subsidiary, and to amend authorised share capital, as we did not have sufficient information at the time of voting. (two resolutions)

We voted against the approval of an Employee Stock Purchase Plan at Glodon, as we believe one-year vesting periods are too short term and not in shareholders' interests. (three resolutions)

We voted against the appointment of the auditor and the election of two directors at Hualan Biological Engineering. At the time of voting, the company had not disclosed a breakdown of the fees paid to its auditor, and we do not believe the directors are truly independent. (three resolutions)

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.

Proxy voting: Q1 2022

Asia Pacific Leaders Sustainability proxy voting: 1 January - 31 March 2022

During the quarter there were 52 resolutions from eight companies to vote on. On behalf of clients, we voted against one resolution. 

We voted against the approval of fees to be paid to the directors and commissioners at Bank Central Asia as we believe they are excessive. (one resolution) 

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.

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For illustrative purposes only. Reference to the names of example company names mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies. Companies mentioned herein may or may not form part of the holdings of Stewart Investors. Holdings are subject to change.

Certain statements, estimates, and projections in this document may be forward-looking statements. These forward-looking statements are based upon Stewart Investors’ current assumptions and beliefs, in light of currently available information, but involve known and unknown risks and uncertainties. Actual actions or results may differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements. There is no certainty that current conditions will last, and Stewart Investors undertakes no obligation to correct, revise or update information herein, whether as a result of new information, future events or otherwise.

Source: Stewart Investors investment team and company data. Securities mentioned are all holdings which have/have had a portfolio weight over 0.5% from representative Asia Pacific Sustainability Strategy, Asia Pacific & Japan Sustainability Strategy, Asia Pacific Leaders Sustainability Strategy, European Sustainability Strategy, European (ex UK) Sustainability Strategy, Global Emerging Markets Leaders Sustainability Strategy, Global Emerging Markets Sustainability Strategy, Indian Subcontinent Sustainability Strategy, Worldwide Sustainability Strategy and Worldwide Leaders Sustainability Strategy accounts up to 31 December 2022.

The Stewart Investors supports the Sustainable Development Goals (SDGs). The full list of SDGs can be found on the United Nations website.

Source for Climate Solutions and impact figures: © 2014–2023 Project Drawdown (drawdown.org). Source for Human Development Pillars: Stewart Investors investment team.

Source for climate solutions and human development analysis and mapping: Stewart Investors investment team. Contributions are defined by the team as demonstrable contributions to any solution, either direct (directly attributable to products, services or practices provided by that company), or enabling (supported or made possible by products or technologies provided by that company).

Investment terms

View our list of investment terms to help you understand the terminology within this document.