This year marks the 20th anniversary of the Fidelity Asia Fund and over that period, Asia has transformed beyond recognition. Two decades of on-the-ground investing have given us a front-row seat to this evolution – from low-cost export-driven economies to a burgeoning middle class to technology innovators. That history matters. It offers us a unique vantage point to understand the region’s long-term structural shifts and to identify opportunities others may overlook.
From “Factory of the World” to technology leader
When the Fidelity Asia Fund launched in 2005, China was the world’s workshop - a low-cost hub for textiles, electronics, and basic manufactured goods. The growth story then centred on scale and cost advantage. Meanwhile, India was barely on investors’ radars, and Korea and Taiwan were emerging players in the global tech ecosystem.
Fast-forward twenty years, and the narrative has evolved.
From copycat to innovator
China has moved well beyond imitation to global innovation leadership. In electric vehicles, companies such as BYD now outsell traditional carmakers in key markets. China also dominates renewable energy technologies, producing around 80% of the world’s solar panels and the bulk of global battery supply. This industrial transformation is not just about scale; it’s about technological leadership.
In artificial intelligence (AI), Chinese firms are advancing rapidly. Tencent and Alibaba are embedding AI across platforms, enhancing advertising precision, customer engagement, and monetisation. This shows how China’s innovation ecosystem, backed by vast data resources and deep government support, continues to mature.
Asia is no longer just catching up technologically; it is increasingly setting the pace in applied innovation, with AI, semiconductors, and green energy at its core.
Korea and Taiwan: The enablers of the AI age
For the past two decades, Korea and Taiwan have been the quiet engines behind global technology. While their specialisation in semiconductors and electronics remains, their strategic importance has surged.
Taiwan Semiconductor Manufacturing Company (TSMC) has grown to a global linchpin, producing over 90% of the world’s most advanced chips. Without TSMC, the devices and digital infrastructure that define modern life - smartphones, cloud computing, and AI - would simply not function.
Meanwhile, Samsung Electronics and SK Hynix dominate the memory chip market, producing the DRAM and NAND chips that power AI systems, autonomous vehicles, and next-generation data centres. Together, these companies form the backbone of the digital economy.
In essence, Korea and Taiwan provide the “picks and shovels” of the AI gold rush. As investors debate which U.S. tech giants will win the AI race, it is Asian manufacturers that supply the components to make that race possible, a reminder that innovation leadership comes in many forms.
Our analysis echoes this view: Asia is no longer just catching up technologically; it is increasingly setting the pace in applied innovation, with AI, semiconductors, and green energy at its core.
India’s rise into the spotlight
Two decades ago, India was seen as a frontier market. Today, it is central to global growth discussions. Its GDP per capita stands roughly where China’s was 15 years ago, suggesting a long runway for expansion. India’s demographic advantage of a young, growing population supports a consumption boom that is steadily moving up the value chain.
The country’s transformation is visible in corporate leadership too. Who would have imagined, 20 years ago, that Tata Motors would own Jaguar Land Rover? Today, Indian firms compete globally in sectors from information technology services and pharmaceuticals to digital finance and renewable energy.
Recent data also shows that India is now the world’s fastest-growing major economy, outpacing peers even in challenging global conditions. For investors, that growth is underpinned by rising domestic savings, improving governance, and a government committed to infrastructure and digitalisation.
Asia is no longer the world’s factory. It is a hub of innovation, consumption, and transformation.
What hasn’t changed – the nuances that define Asia
Despite its evolution, certain enduring features still define Asian markets and remain key for investors.
Governance challenges
State-owned and family-controlled enterprises still dominate parts of the region. While this can lead to inefficiencies, it also creates opportunities for active investors who engage with management teams and identify those aligned with shareholders’ long-term interests.
Retail investor influence
Local investors remain a powerful force. In markets like China and Korea, retail flows can amplify market swings, creating volatility that may unsettle passive investors but can be harnessed by disciplined active managers who focus on fundamentals.
Liquidity Gaps in ASEAN
Smaller markets such as the Philippines and Thailand remain relatively shallow. This lack of liquidity can trigger sharp short-term movements, but it also means pricing anomalies emerge — a source of alpha for long-term investors who can look through noise to intrinsic value.
Navigating concentration risk
Asia, like the US, faces its own ‘concentration challenge’. The dominance of technology giants such as TSMC, Tencent and Alibaba can create index distortions. Yet, active investors can choose differently. For example, over the last decade we have owned businesses such as Kweichow Moutai, whose brand power and cash flows have often rivalled or exceeded those of the larger technology companies.
The lesson? In Asia, as elsewhere, a selective, bottom-up approach can capture growth while avoiding crowding risks - a hallmark of our long-term investment philosophy.
Risks and realities: navigating with awareness
Investing in Asia’s growth story also means recognising the risks that come with opportunity: Geopolitical tensions, particularly around US-China trade and Taiwan, can periodically unsettle markets; regulatory intervention can quickly change company outlooks overnight; currency volatility and liquidity constraints in smaller markets can amplify short-term fluctuations.
Our experience in the region helps us to anticipate, assess, and adapt to these risks. Our active approach enables us to adjust exposures dynamically, hedge where appropriate, and focus on companies with robust balance sheets and transparent governance.
However, we do not think risk is something be avoided, but something to manage. The key is selectivity, diversification, and a long-term perspective. Our deep research presence across Asia allows us to understand local dynamics and position portfolios for resilience as well as return.
Looking ahead – the next chapter for Asia
As the Fidelity Asia Fund enters its third decade, three major tailwinds in the nearer term stand out:
- A softer US Dollar
A weaker dollar historically supports Asian asset performance by easing funding conditions and boosting capital flows into emerging markets. - Rising domestic investor flows
Retail participation across China, India, and Korea is deepening, adding resilience to markets as domestic wealth accumulates. - Technology leadership
Asia is at the centre of the global AI supply chain, leading in semiconductors, clean energy, and fintech innovation. The region’s companies are shaping the technologies that will define the next decade.
Asia is no longer the world’s factory. It is a hub of innovation, consumption, and transformation. For investors seeking diversified sources of growth, Asia offers a compelling combination of scale, dynamism, and structural opportunity.
With 20 years of experience investing in the region through cycles, crises, and reinventions, Fidelity Asia Fund stands ready for what comes next: to identify tomorrow’s winners today, with a clear-eyed understanding of both potential and risk.
