Asia's cashed-up companies beat market as volatility swirls

China Mobile

04/04/2023 09:24

By Patturaja  Murugaboopathy  and Gaurav Dogra
       April 4 (Reuters) - Shares of Asian companies with big
cash balances are outperforming the broader market and analysts
say the money will be a cushion against volatility and earnings
downgrades.
    The shares of the top 300 listed Asian companies based on
their net cash levels have risen about 9% this year, according
to Refinitiv data, compared with the MSCI Asia Pacific
 .MIAP00000PUS  share index's 4.6% gain.
    "Cash implies safety amidst the volatility we have seen to
start the year, said Vikas Pershad, investments portfolio
manager for Asian Equities at M&G Investments.
    "It is understandable that investors would be allocating
more capital to companies with above-average cash balances, and
would be taking capital away from companies with heavy balance
sheets," he said.
    A balance sheet buffer can offer protection against rising
borrowing costs and be a ready source of funds for buybacks,
dividends or investment in future growth and can come in handy
as rates go up and markets turn fickle and jittery.
    "A healthy balance sheet is a prerequisite for us," said
Pershad.

    Cash levels do not necessarily drive stock performance
alone, though strong balance sheets have enhanced the appeal of
shares in companies such as China Mobile, Samsung Electronics
and TSMC since the start of 2023.    
    China Mobile  600941.SS   0941.HK  is up 37% this year as
investors like its high dividends and growth potential.
Chipmakers Samsung Electronics  005930.KS  and Taiwan
Semiconductor Manufacturing Co  2330.TW  also hold high cash and
have been rebounding on hopes that chip demand will pick up.    
    By contrast Asia's top 300 holders of net debt, about a
quarter of which are real estate firms, mostly in China's
beaten-down property market, have risen just 0.2% this year.
    Nomura said Asian investors could find insulation from
recession risks by looking for cash-rich companies likely to be
able to sustain dividends or buybacks even in tough times.
    For Nomura, such a strategy, which the brokerage calls BCD
or buybacks, cash, and dividends, has outperformed the MSCI Asia
Pacific index by 60% since the index's inception in May 2019, it
said.
    There are signs it is a popular theme, with the Global X
Asia Pacific High Dividend Yield ETF  3116.HK , which invests in
companies that provide high and stable dividends, up 6.6% this
year.
    Even though March brought the steepest bond rally for years,
something that usually supports growth stocks as yields become
less attractive, BNP Paribas' Asia-Pacific head of equity
research, Manishi Raychaudhuri, sees safety commanding a premium
for a while yet.
    "Our search for deep value now takes us to stocks that have
more net cash on their balance sheets than their market cap," he
said. 

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Performance of Asia’s cash rich firms vs the broader index    https://tmsnrt.rs/3zwAwlc
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 (Reporting by Patturaja Murugaboopathy and Gaurav Dogra in
Bengaluru: Editing by Tom Westbrook and Susan Fenton)
 ((patturaja.muruga@thomsonreuters.com;))