Innovation and growth: An investment case for Asia

Long viewed by European investors as a niche asset class, Asia's emerging markets now offer some of the most dynamic and fast-growing investment opportunities of our time. Led by China and India, the biggest emerging markets in the world, Asian markets contribute to about half of the world’s global economic output.

What investors need to know about Asia

• In 2025, 60% of the world’s population is living in Asia, with an emerging middle class that’s driving domestic consumption. These countries quite often have rapidly growing economies, often undergoing significant industrialisation and integration into the global economy. India and China are the biggest emerging markets in the world. Asian markets contribute to almost half of the world’s global economic output.

• Asia is home to many well-established companies with strong fundamentals, particularly in areas such as AI, electric vehicles, e-commerce and manufacturing. The recent global whirlwind over Chinese AI model DeepSeek illustrates the missed opportunity of overlooking the strength of Asian innovation. 

• North Asia is home to leading manufacturing and technology companies, while Southeast Asia is seeing rapid growth in consumer demand, especially in areas like internet and e-commerce.

• Stocks in Asian markets are often priced much cheaper than US companies that may offer similar potential business growth.

• As Asia continues to expand quickly, investors can diversify their investment portfolios with opportunities that are different than ones found in markets like Europe and the US. (And spreading investments across the globe can lessen a portfolio’s exposure to region-specific risk.)

Gaining exposure to Asian markets

When looking at global indices, however, the presence of Asian markets is often quite small, compared to US and European markets. So global funds that track these indices may not offer the type of exposure to Asian companies that investors are seeking.

That’s where a strategy dedicated to Asian markets can help.

The Invesco Asia Dragon Trust (IAD) provides access to long-term growth opportunities across Asia, as well as Australasia. It invests in a broad range of companies in the region such as Taiwan Semiconductor Manufacturing, Tencent and Samsung Electronics as it aims to deliver both capital growth and income.

Undervalued and overlooked

The trust is managed by a team of valuation-driven experts who focus on identifying companies that appear undervalued, meaning their stocks are selling for a price that’s below their perceived fair value. How is this determined? Our fund managers take a detailed look at a company’s financials, leadership, future earnings potential, and wider economic market conditions to decide whether it represents good value.

This approach is designed to find overlooked companies in fast-growing markets. By investing in a company listed in Asia at a price below its potential intrinsic value, it could create opportunities for capital growth and income generation — if the value goes up, investors could earn a higher return on their initial investment.

In our view, many companies in these markets remain undervalued.

Why are some people cautious of investing in Asian markets?

We believe there’s a compelling investment case in Asian markets. However, it’s important for investors to be aware of the risks. Asian markets can be more volatile than developed markets due to factors like political instability, weaker regulatory environments, currency fluctuations, and reliance on commodity prices. For example, sudden changes in government policy or trade relationships can affect market performance. Individual countries within the region may also have their own unique risks and economic challenges which can impact returns.

Diversifying investments and maintaining a long-term perspective can help mitigate some of these risks.

Considerations of investing in Asian markets

For more information about the Invesco Asia Dragon Trust plc, please click here to find out more.