Stewart Ivory's Global Emerging Markets fund is overweight Asia and is adding to positions in China,...
Stewart Ivory's Global Emerging Markets fund is overweight Asia and is adding to positions in China, Malaysia, Taiwan, India and Thailand.
The group is making the changes because it believes economic recovery is spreading throughout the region and the outlook for strong earnings growth will continue.
The portfolio is also overweight in Emerging Europe and these positions are being taken at the expense of Latin America. Angus Tulloch, head of the Stewart Ivory global emerging markets team, said the influential Brazilian market faces a testing time.
Tulloch said Asia's prospects were buoyed by current account surpluses and a stronger yen in Japan, allowing currencies to stabilise and interest rates to fall. Meanwhile, companies are aggressively addressing their costs and valuations are still attractive on a global perspective. The expected pick-up in domestic consumption for the remainder of 1999 is added cause for optimism.
He said: "Within Asia we are adding to infrastructure stocks and utilities in China. Devaluation fears have been overplayed and such companies therefore represent good value. There are some banks we like because they are conservatively managed and innovative. Examples are Sinopac and new holding Taishin, both in Taiwan.
In turning more positive on Emerging Europe, key themes are the rebuilding of the Balkan region and economic recovery in Germany.
Stuart Paul, deputy head of the emerging markets team at Stewart Ivory, said Hungary and Poland are expected to be key beneficiaries of the forecast increase in Germany's economy while Greece is on track to meet requirements for joining Emu in 2001
The negative stance on Latin America consists of a neutral weighting to Brazil and an underweighting in Mexico.
Paul said: "Initially we saw further momentum in Latin America as positive news on inflation allowed interest rates to be cut further. However, sentiment shifted dramatically during May when investors were unsettled by concerns about the lack of genuine fiscal progress in Brazil, the weakened position of President Cardoso and fears of higher US interest rates.
"Prospects for Brazil may be better than for Mexico predominantly because valuations are starting to reflect a lot of the bad news.
Although the outlook for economies in the Middle East and South Africa continues to improve as interest rates fall, political risks are high, according to Paul and he remains generally cautious.
The top 10 holdings in the portfolio of 92 stocks make up 22.4% of the assets.
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