10 Questions with Robert Horrocks

Ruth Saldanha, a senior editor with Morningstar based in Canada, interviewed Horrocks in November.

1. Which is your favorite Asian market? The Shilin Night Market in Taipei. Oh, you meant stock market? They each have their own specialties: Taiwan and South Korea for world-beating technology companies, Singapore for access to the region through extremely well-governed companies; Vietnam for the region's best macroeconomic growth story. I don't play favorites.

2. Where are the best opportunities today? China's A-share market. It's vast and liquid, and it's thinly researched by long-term investors. The average quality of governance is weak, but there is a large universe of well-governed businesses that are obscured by that average.

3. Do you factor sustainability into your stock picks? Yes, in three stages of the process: the beginning, the middle, and the end. Will the company grow sustainably? Does it have a strong moat? Is it properly governed? What are the potential regulatory issues that have not been expensed? Is there an opportunity to fulfill an unmet need of the growing middle class? These are fundamental issues.

4. Why are you underweight technology? There are some great technology companies in Asia, and we own some. However, this sector suffers from some drawbacks, such as untested business models, overhyped business expectations, high valuations, and cyclical industries.

5. Why the overweight in industrials? One might think that cyclicality is an issue, but that is not the case with every business. In addition, it is not an area that is subject to the hype of the marginal investor.

6. What is the biggest risk for investors in Asian markets? It isn't politics or trade or currency or portfolio flows or valuation. The biggest risk is your susceptibility to greed and fear and how you deal with those emotions.

7. What's the best advice you've received? Pay attention to valuation and, in particular, dividends. Over a beer in the height of the tech bubble in Taiwan, when many cashless companies' share prices were soaring, an investor friend pointed to a steadier business of the new tech era and simply said, "4% yield." That company is still there, even as many others have ceased to exist.

8. What do you enjoy doing when you aren't investing? I will watch any team that plays beautiful soccer. In addition to those teams, I watch Newcastle United. I was born in Newcastle, where soccer is often likened to a religion—except the attendance at "church" is much greater. I play two to four times a week. Nothing is better than when the chaos yields to a brief moment of perfection and a goal is scored.

9. Where did you go on your last vacation? Barbados. I first went when I won tickets in a raffle. Just before we had to leave, we adopted twin boys. The Coral Reef Club was so warm in welcoming them and helping us celebrate their first birthday. We try and go there every year.

10. What book are you recommending these days? Factfulness by Hans Rosling. It has everything I want from a book: It is a quick read; it is true; it will teach you something new; and it will make you feel optimistic and joyful about humans, more so than any work of fiction.

Robert Horrocks is chief investment officer at Matthews Asia and portfolio manager of Matthews Asian Growth and Income MICSX, which has a Morningstar Analyst Rating of Silver. He also co-manages Silver-rated Matthews Asia Dividend MIPIX. Before joining Matthews Asia in 2008, Horrocks was head of research at Mirae Asset Management in Hong Kong and chief investment officer at Everbright Pramerica in China. Horrocks earned his Ph.D. in Chinese economic history from Leeds University in the United Kingdom and is fluent in Mandarin.

This article originally appeared in the Spring 2019 issue of Morningstar magazine. To learn more about Morningstar magazine, please visit our corporate website.