Newton's Xuejun Sun, manager of the Newton Oriental Growth fund remains convinced that Korea and Tai...
Newton's Xuejun Sun, manager of the Newton Oriental Growth fund remains convinced that Korea and Taiwan are key long-term plays, despite negative sentiment on the countries.
Sun sees buying opportunities developing in the technology sectors of those countries, two of his most bullish long-term plays where broad-based sell-offs have brought valuations back considerably.
The fund, which is driven by top-down economic fundamental analysis on geography and sectors, has outperformed the sector average over 12 months and three years up to 13 September. Over one year it has posted offer to bid returns of 33.1%, while over three it has returned 40.1%, ranking the fund 1 out of 75 funds and 3 of 67 funds in the Standard & Poor's Far East Ex Japan sector.
Sun ascribes this to aggressive positions compared with his peers in Korea and Taiwan both long-term plays in the fund, but markets that have been sold down by around 30% and 20% respectively.
Sun has been bringing his positions in the two economies back to neutral but is looking at using his 5% cash position, which represents profits taken on tech shares, to bolster those positions when he believes the market is nearing its bottom.
Sun said: "Already in Korea and Taiwan we are seeing valuations becoming very, very tempting and we will probably put more money back into the economies in the tech sectors where we have basically been deployed.
"I am unrepentant about my long-term bullishness about those two economies. They offer some internationally competitive blue chip technology companies such as Samsung. They have cheap labour, technological expertise, and the manufacturing capacity so that in five years' time they will be outperforming their neighbours in the region."
China, which represents 18% of the fund, remains a key long-term overweight position, and in times of global economic slowdown offers shelter for investors. Together Hong Kong and China make up 40% of the portfolio.
Sun said: "Every economy will be effected by the slowdown in the global economy including Taiwan and China, but in China you have a huge domestic market which you don't have in other markets. It can fend off a global slowdown."
Despite a similarly massive domestic market, Sun is underweight India.
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