This year's Beijing Olympics are the focus of some nervous attentionfrom fund managers in the Asia/Pacific region, according to Standard & Poor'sFund Services, which has just published its annualreview on equity funds in the region.
S&P Fund Services lead analyst Andrew Aikman explains that it is not the Olympics themselves that concern the managers but their role as a pivotal event. “Some believe the Chinese government will become more aggressive in its attempts to slow demand growth after the games. However, others argue that the Olympics provide China with an opportunity to cement its position on the world stage and attract further investment,” he said.
Across Asia (including emerging Asia), the fund managers interviewed by S&P Fund Services have a mixed view of how markets will develop but on the whole are generally positive. Some managers point to continued economic expansion in China and India that will maintain the “super-cycle” in commodities. They also highlight the substantial size of China and intra-regional trade, which should help insulate the region from the financial volatility in Western developed markets.
Increasing household wealth and the continued development of the financial markets in the region, particularly in China and India, is also a popular theme among fund managers and several played it through listed stock exchanges such as the Hong Kong and Singapore exchanges – two of the best performing stocks during the review period. However, some managers warned that the surge in IPOs and trading volumes which underpinned both the Hong Kong and Singapore exchanges signaled the formation of a stock market bubble.
Japan as a market is widely expected to continue to under-perform. “Valuations are attractive but few could identify a catalyst to turn the market round and they could find more attractive opportunities in the rest of South East Asia,” said Aikman.
In its annual review, S&P Fund Services has published detailed reports on 81 Asian and Pacific funds. In all, 49 of the funds are invested in South East Asia, 20 in emerging Asia and 12 in the Pacific region. The full reports are available at www.funds.standardandpoors.com.
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Standard & Poor's Fund Services is the world's leading provider of qualitative,forward-looking fund research, including fund management ratings on over 2,200funds worldwide. These ratings - unlike past performance rankings - are basedon in-depth analysis of the stability of a fund's parent group, the appropriatenessof its investment policy, and the sustainability of its performance. They arecontinuously monitored and updated reports are posted to www.funds.standardandpoors.com
Funds rated in the AAA to A categories demonstrate to Standard & Poor's FundServices an ability to provide above average returns over a long-term period(relative to funds in the same sector) along with a strong ability to adhereto a consistent investment process. The differentiation in the rating categoriesis based on the consistency of a fund's performance relative to its own objectivesalong with Standard & Poor's assessment of the investment process and management.The rating is based on an evaluation of qualitative (management, investment process,and organisation) and quantitative (historic performance, portfolio construction,and volatility) factors, which contribute to long-term performance. The ratingdoes not address the market, credit or counterparty risk of a fund, nor a fund'ssuitability as a counterparty or obligor.
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