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By Bridget B. Hughes, CFA | 06-09-2011 09:26 AM

The Asia Dividend Story

Asia is quite attractive from the perspective of an investor looking for both yield and growth in an underlying dividend, says Matthews' Jesper Madsen.

Bridget Hughes: Hi. My name is Bridget Hughes. I'm one of the analysts at Morningstar. I'm here at the Morningstar Investment Conference for 2011, and I'm with Jesper Madsen, who is with Matthews International Capital Management. He's the co-manager on Matthews China Dividend, Matthews Asia Dividend, as well as Matthews Asian Growth & Income.

Jesper, we talked earlier about this idea of a global quest for yield, and I'm curious if you can elaborate a little bit more on what that is and how Asia dividend investing fits in to that context?

Jesper Madsen: Well I think, globally, people are looking for yield or trying to find yield, and also with inflation rates obviously being a problem globally, maybe less so currently in places like the U.S. and Europe, but obviously people are looking down the line and saying, what does this very expansionary monetary policy in both places mean for the future in terms of inflation as well.

Interest rates, or what people can make on fixed-income instruments are also are very low. The 10 year is sitting at less than 3% in the U.S. So as a result, it is very difficult for people today to find that combination of both yield and growth in that underlying dividend to give them the protection for future inflation as well.

And such, Asia is one of the few places, and this is probably not well known to most people, that actually deliver on both accounts. So, you have higher yields in Asia. Right now, for instance, if you take the Asia Pacific Index as a proxy and compare that to the S&P 500, the S&P would be yielding about 2% currently. If you go to Asia, you have a yield of about 2.9%. So, you get a yield pickup of about 90 basis points, and that includes Japan. If you take out Japan, you're actually sitting north of 3%. That combined with the fact that Asia has actually delivered faster growth rates in that underlying dividend makes Asia quite attractive from the perspective of somebody looking for both yield and growth in that underlying dividend.

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