Article

Innovation and growth: An investment case for Asia

asian woman using a smart glasses in front of an office building (the glassed used in the shot is a generic product in China)
Key takeaways
1

Asian markets offer a range of growth opportunities and contribute to a large part of global economic output.

2

The Invesco Asia Dragon Trust (IAD) provides access to long-term growth opportunities across Asia, it invests in a broad range of companies in the region. 

3

Many companies in these markets remain undervalued, meaning their share price does not reflect their true intrinsic value and potential for growth.

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

Benefits

Cautions

Asian markets are rapidly growing

Market volatility

Opportunity for portfolio diversification

Currency fluctuations

 

Undervalued, sometimes cheaper than stocks in the US and Europe

Geopolitical tensions

Exposure to high growth sectors such as manufacturing and AI

Growth can slow down

Conclusion

Asian markets offer a range of growth opportunities for forward-looking investors. We believe there is an opportunity cost of ignoring these often-overlooked markets. As companies across Asia continue to adapt and innovate, they offer a valuable source of potential returns, making them an important consideration for any well-rounded investment strategy.

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

  • Investment risks

    The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

    The Invesco Asia Dragon Trust plc invests in emerging and developing markets, where difficulties in relation to market liquidity, dealing, settlement and custody problems could arise.

    The use of borrowings may increase the volatility of the NAV and may reduce returns when asset values fall.

    The Invesco Asia Dragon Trust plc uses derivatives for efficient portfolio management which may result in increased volatility in the NAV.

    Important information

    Data as at 30 May 2025 unless otherwise stated.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

    Views and opinions are based on current market conditions and are subject to change.

    For more information on our products, please refer to the relevant Key Information Document (KID), Alternative Investment Fund Managers Directive document (AIFMD), and the latest Annual or Half-Yearly Financial Reports. This information is available in the literature section.

    Further details of the Company’s Investment Policy and Risk and Investment Limits can be found in the Report of the Directors contained within the Company’s Annual Financial Report.

     EMEA4543161/2025