By Adam Lewis Martin Currie Pacific will continue to monitor the benefits of buying back in s...
By Adam Lewis
Martin Currie Pacific will continue to monitor the benefits of buying back in shares in an effort to reduce the trust's discount of 18.9% as of 24 April.
Over the 12-month period to 28 February 2001, the NAV of Martin Currie Pacific fell 27.2%, compared to a fall of 18.7% in the MSCI Pacific Free (Japan fixed at 40%) Index.
Adrian Mowat, investment manager, said the portfolio performance suffered from poor stock selection in Japan and Asia generally, where in the 12-month period from the start of March 2000 its technology stocks have done particularly badly.
Tim Kimber, chairman of the trust, said: "In a difficult year for equity markets world-wide, the trust underperformed its benchmark. Stock selection in both Japan and Asia was disappointing.
"By contrast, the Hong Kong portfolio was particularly successful as our focus on companies benefiting from lower interest rates proved correct. Offsetting poor stock selection, asset allocation in Asia was positive."
As a way of adding value to the £84.2m trust, 2.3 million shares have been bought back, a scheme that Mowat said has been in place for most of 2000.
He added that short-term shareholders benefit from this by an uplift in NAV but long-term it does not have a real impact on the trust's overall performance.
Kimber said: "Looking ahead, we will keep the option to buy back more shares under review at all times. The recent fall in interest rates is hopefully the harbinger of better markets to come."
In defence of the trust, Mowat said that in the first three months of this year, while the Nasdaq has fallen 25%, the portfolio's benchmark only fell 2.1%, with the recent technology bounce boosting the Korean and Taiwan markets.
He added that during the past few years, the Asian markets have had a strong correlation to what happens in the US and he now believes there is evidence that this correlation is breaking and investors will soon gain the diversification benefits of investing in Asia.
Mowat believes that, although confidence is low in Asia at the moment, this could soon change. "A virtuous cycle could soon be developing as more foreign investors start coming in. Already there is evidence of more net foreign buying in these markets," he said.
Mowat argued that emerging markets tend to perform well when monetary policy in the US is easing, citing that between 1988-1993 both emerging and Asian markets did well. He said that the loose liquidity finds its way into Asia, which in turn moves the markets higher.
Structural changes going on in Japan at the moment are also positive for the trust going forward, he said, adding that the new prime minister and new faces in government mean there will be less impediment to change.
Liquidity in Japan is also being boosted by the Bank of Japan adopting an inflation target rather than an interest rate target, thus loosening monetary policy in the region, he said.
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