Global emerging markets funds have decreased their exposure to Africa and the Middle East from 12.6%...
Global emerging markets funds have decreased their exposure to Africa and the Middle East from 12.6% down to 12.01% which is the lowest level in the past six months, according to the latest country weightings report from equity fund research group, eMergingPortfolio.com.
From a sample of 69 funds domiciled around the world, exposure to Asia has increased from 43.64% to 44.27% while exposure to Latin America is down from 26.14% to 26.03% and exposure in Europe is down from 14.93% to 14.7%. Average cash levels are up from 1.98% to 2.51%.
According to Ian Wilson, head of fund research, Korea continues to be the most favoured country with exposure averaging 11.89% at the end of the first quarter of 2000, up from 10.92%.
The top four countries with weights above 10% are Korea, up from 10.92% to 11.89%; Brazil, up from 10.85% to 11.29%; Taiwan, up from 9.98% to 10.86%; and Mexico, up from 10.65% to 10.83%.
The biggest decreases to individual countries were in India, down from 8.37% to 6.97% and South Africa, down from 7.32% to 7.13%.
On an individual fund basis, funds are showing wide variations. For instance, the Lexington Worldwide Emerging Markets fund has only 7.03% in Latin America while the Lazard Emerging Markets fund has 37.71% in the region.
In Asia, the biggest exposure is in the Lexington Worldwide Emerging Markets fund with 65.03% while Genesis Emerging Markets fund only has 26.68%. In Europe, Scudder Emerging Markets Growth Fund has the biggest exposure at 25.13% against as little as 7.14% for the Lazard Emerging Market portfolio.
In Africa and the Middle East, Comgest's Magellan fund has 24.5% exposure while Hansberger Institutional Emerging markets fund has just 5.7%.
Gartmore Emerging Markets fund has one of its largest allocations to Brazil with 13.47%. According to the group, Brazil has grown faster this century than any other major economy in the world, with the exception of Japan.
Nevertheless, political instability and a recurring cycle of boom and bust has plagued the country.
It is more than 15 years since the last military president left office and the current government is implementing fiscal reforms that could stabilise the economy in the long term. A collapse of international confidence and a massive flight of foreign capital at the beginning of 1999 spurred the politicians into action. As a result, Brazil has made a remarkable recovery in the past year, with industrial production increasing by 13% in the year to February and the overall economy expanding by an annual rate of 3.1% in the fourth quarter of 1999.
Two other favourite markets are Taiwan and Korea where Gartmore Emerging has an allocation of 10.83% and 15.03% respectively.
Gartmore believes Asia is home to some of the world's leading technology firms, including Taiwan Semiconductors (TSMC), the largest made- to-order silicon chipmaker in the world.
Companies such as TSMC and its Korean rival, Samsung Electronics, have had to become increasingly efficient and agile in order to survive in an increasingly competitive international marketplace.
According to Gartmore, these firms are able to respond rapidly to the constant process of innovation taking place within the industry and to benefit from soaring demand generated by the growing number of companies that are choosing to outsource production and concentrate on design and sales."
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