With mounting US debt and stretched valuations, investors are starting to look beyond American markets. This Q&A from the FundCalibre team, dives into the appeal of Asian equities, particularly in regions with strong balance sheets, growing consumer bases, and undervalued companies. Edmund Harriss, co-manager of the Guinness Asian Equity Income fund, explores the economic fundamentals underpinning Asia’s growth, from resilient currencies and orthodox monetary policies to emerging tech leadership in areas like AI and renewables. He also highlights dividend-paying companies that offer stability and long-term income potential.
Why you should listen to the interview: If you’re concerned about high US valuations or seeking growth beyond big tech, this episode reveals why Asia could be your next opportunity. Discover how macroeconomic strength, income-generating businesses, and surprising tech leadership make Asian equities a compelling and overlooked alternative.
This interview was recorded on 10 June 2025. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
What US debt means for Asia
“The rising US deficit, the spending gap is roughly $700 billion at the moment. They raise about $5 trillion in tax. They spend about $5.7 trillion. So they’re having to borrow $700 billion to fund that gap, but they’re also having to borrow a further $900 billion to pay the interest on that debt. And both the deficit and the interest on that debt are increasing. So this creates a significant challenge because to reverse that requires contractionary policies.
“US equities are going to find it harder going in an economy that is coming under pressure where fiscal policy is going to need to contract. And with valuations in the US looking very stretched at at over 22 times PE or an earnings yield of about sort of 4-4.5%. That means investors are gonna look elsewhere. And Asian markets are looking by and large, pretty cheap, certainly relative to their own histories and also in absolute terms.
“Investors are now going to revisit their US allocations and they’re going to be looking at opportunities elsewhere.”
A creditor region
“Asia is a creditor region. It is a holder of net foreign assets, whereas America is a debtor, it owes and it owes money to the Middle East and it owes money to Asia. And when we look across the region most countries are running current account surpluses. So we’ve got surpluses in Asia, we’ve got banking systems that are well capitalised. Loan to deposit ratios are less than a a hundred percent. It’s sort of pursuing an orthodox monetary policy from a top down perspective, the region looks very stable.
“And when you look at somewhere like China, yes, we know that there is a lot of debt within that system just as there is in America, but the interest rate on Chinese debt is about 1.5-2%, whereas in America it’s moving up towards 4.5%. And the other big difference is that all the Chinese debt on 99% of it is held domestically, whereas about 40% of US debt is held by overseas investors. So therefore they are much more in control of their own destinies. They don’t owe outsiders huge amounts of money, and the system is not heavily overloaded.”
An unexpected leader in innovation
“And then we have at the beginning of January, Deep Seek emerges. The thing that they offered was cheaper and speedier machine learning. They built up the know-how and why did they do that? Because China was denied access to the fastest chips, the most high performance chips. So what do you do? You’ve got to find a way to lighten the load in terms of machine learning. And that’s what Deep Seek offered.
“And suddenly we’re in a world where China’s not copying anymore, but they’re designing their own stuff. They’re leading. It’s the irony that the efforts to constrain China are the very things that are driving new innovation in order to solve for that. And that was a story that that was followed by Japan years ago by Korea and by Taiwan. China’s been doing it too.”
The structural case for Asia
“Asia trades on about 13 and a half times. That is around an 8% earnings yield. And I talk about it in terms of earnings yield because you compare it to bond yields, they’re trading well above their equivalent bond yields. There’s value there. You are being compensated for the risk and more.
“Where our funds sort of comes into focus is because of the dividends our companies are producing those excess cash streams, these companies are generating more cash than they need to fund their growth. It’s coming to us in the form of a dividend. And if you are an income investor those dividends are quite useful because the current valuations of 4% yield is not hard to achieve. At the portfolio level, our fund has averaged a 4% yield over its life. So growing profits, growing dividend streams, no valuations, a story that is supportive for longer term growth.”
Conclusion: Asian markets may no longer be the high-risk, high-volatility investments many investors assume. With stronger balance sheets, growing innovation, and healthy dividends, Asia now offers a rare combination of value and opportunity.
Main image: maria-stewart-g6DmKxFoQfE-unsplash
