Looking For Lasting Strategic Moats In Asia

The importance of strategic moats, something that holds off the competition and lets a company generate long-term returns, isn’t lost on any fundamental investor. But identifying moats isn’t a straightforward process in familiar situations, let alone when analyzing foreign companies.

“The history and width of economic moats in Asia is open to even greater deliberation in many cases given ownership structures, a historical lack of standardized accounting, crony capi­talism, protectionist policies and weak transparency in subsidy and tax regimes,” writes Matthews Asia portfolio manager Kenneth Lowe.

Cronyism, protectionism can distort a company’s actual competitive edge

The first pitfall that Lowe warns investors to watch out for is the distorting effect of cronyism. If a company has been getting ahead because it’s...