A $30 Billion Asset Manager Turns Cautious on Apple SuppliersBy and
UBS Asset Management’s Wong has sold entire holding in Largan
Good opportunities in banks, AI-related stocks, Wong says
After doing well out of Apple Inc. suppliers for several years, a top fund manager says it’s time to take money off the table.
Geoffrey Wong, head of emerging markets and Asia Pacific equities at UBS Asset Management, has reduced his holdings of the suppliers as he doubts consumer demand for high-end mobile phones will keep rising. Wong’s now sold out of Largan Precision Co., a stock which he held since at least 2011. The handset lens maker’s shares soared 610 percent in Taipei in the six years through 2017. This year, they’re down 14 percent.
“We are a bit more cautious,” said Wong, who oversees a team that manages about $30 billion, including one of the best-performing emerging market equities funds. “Have we reached a price point where consumers are fighting back and saying I’m not going to pay $1,000 for a phone?”
Consumers are also buying cheaper phones with simpler features, Wong said. Apple reported lower-than-expected handset sales for the fourth quarter, after the launch of the pricey flagship iPhone X. Only Xiaomi Corp. and Motorola, which produce less expensive models, shipped more smartphones during the period, according to IHS Markit Ltd.
While shares of Taiwanese component makers have largely fallen in the past year, Chinese producers such as Sunny Optical Technology Group Co. and AAC Technologies Holdings Inc. are among the best performing stocks in Hong Kong, as investors bet on growing demand in China. That’s not tempting Wong though, who said his portfolio now has very little exposure to phone makers.
Wong is bullish on Asian memory chipmakers, such as Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co., as the development of artificial intelligence bodes well for the sector in the next decade. He’s also holding on to Tencent Holdings Ltd. and Alibaba Group Holding Ltd. despite recent volatility, encouraged by their expansion into finance and services.
Banks in emerging markets are also a good investment, Wong said. Non-performing loans are starting to come down as corporate profits improve, while top companies are likely to borrow more as they increase capital expenditure in the coming three years, he said.