Morningstar Magazine - December/January 2015 - 96

Ten Questions

Matthews' Kenneth Lowe on regulatory
changes in India and how the Fed
could affect Asia's emerging markets.
Kenneth Lowe was interviewed in early November.
His answers have been edited for length
and clarity.

important drivers of economic growth globally,
in my mind, it remains vital to invest in those
companies that are adaptable and that can survive
and thrive through economic cycles.

1. What is the emerging market in Asia that investors

aren't paying attention to, but should?

I don't really think about investing in specific
countries, but rather in companies. We look for
quality companies with good track records
and sustainable growth, aiming to find these at
valuations that are cheaper than intrinsic
value. Fortunately, we can find a number of these
throughout Asia, from developed countries
such as Hong Kong and Australia, to more
emerging markets like Malaysia and Thailand.
2. Investors have viewed India's recent elections
as a positive. What should the leadership there do to
get India's economy on the right track?

Matthews International Capital Management,
the parent firm to the Matthews Funds, is
a pioneer when it comes to investing
in Asia. Since 1991, the firm has specialized
in investing in the region's developed
and emerging markets. Kenneth Lowe, CFA,
who has degrees in mathematics and finance
from the University of Glasgow, helps
manage the firm's Asia Focus MAFSX and
Asian Growth & Income MACSX funds.

We've actually witnessed a couple of measures
already with the removal of state control
over diesel prices and an early attempt to decrease
bureaucracy within the government. But
there are many things to do including accelerating
project approval processes, amending labor
laws, recapitalizing the banking system,
liberalizing FDI opportunities, and promoting
urban development.
3. Are you concerned about U.S. monetary policy?

We look for companies that have the right capital
structure in place and for those that have
good capital allocation. From that perspective,
an increase in rates will not likely have a
meaningful impact on our companies.

5. In Africa, one of the biggest concerns is liquidity.
How bad is that problem in Southeast Asia?

I don't find liquidity to be a major issue given my
preference for investing in those companies that
have good operational track records.
6. What did you learn from your biggest
investment mistake?

Never underestimate how important incentive
structures are and make sure that you
understand how these function for the main
stakeholders involved.
7. What is your assessment of the unrest in Hong Kong?

I don't think that the economic implications are
particularly meaningful. They appear short
term in nature and are confined to areas such
as retail and tourism, while much of the economy
carries on as normal. Ultimately, Hong Kong
[will] continue to be the gateway to mainland
China and that will persist despite the unrest.
8. What is your best tip for getting through an
airport quickly?

Be organized, be prepared, and wear the
right shoes.
9. What book had an impact on how you invest?

Although not a book, Berkshire Hathaway's annual
reports are always an interesting read.

4. Is the U.S. or China the more important
economic barometer?

We tend to invest more in domestic demand-driven
companies, which means that our direct exposure
to export-led, U.S.-driven entities is lower
than most. Although both geographies are clearly

96

Morningstar December/January 2015

10. You grew up in Scotland-where would you rather

Unfortunately I'm very mediocre at both! As a Scot,
the weather in California [where Matthews
is located] makes golf such a different experience
from back home, so I'll say on the course.

be, on a links course or on the pitch?
Morningstar Magazine - December/January 2015

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