Standard & Poor's Fund Services latest report, Emerging Markets Asia, resulted in four funds in the ...
Standard & Poor's Fund Services latest report, Emerging Markets Asia, resulted in four funds in the report's universe achieving a higher rating, while five have been downgraded. The report identifies how emerging market Asia funds performed in 1999 depended mainly on three factors: sector positioning: Managers who favoured cyclical stocks in the first half of the year and technology stocks in the second half did best.
Superior stock selection. Now cash exposure or even geared exposure.
The funds that took the right decisions were richly rewarded, while those that didn't, seriousy lagged. For instance, of the 51 funds investing in the Korean stock markets the difference between the best fund and the worst fund was a very considerable 208 percentage points.
Likewise in India, the margin between the first and last funds was also over 200%.
Even markets that had relatively subdued performances saw a big disparity between winners and losers. In the Thai market, which went up 20.2% the best performing fund generated a return of over 65% above the worst fund.
Commenting on the report, Linda-Jane Coffin, head of research at Standard and Poor's said: "Last year in our Emerging Markets Asia report, we commented that fund managers were cautious on the region, looking for clear evidence of reform and restructuring to restore confidence.
"This does seem to be coming through, with most managers now reporting fully invested portfolios, and even some that are geared."
Of the major investment houses, Flemings, Schroders and Fidelity did particularly well as they were amongst the first ones to switch into the telecoms and technology stocks.
Standard and Poor's Fund Services has identified 48 funds investing in Asian emerging markets that have passed a minimum quantitative and qualitative screen.
The top ranked frAAA funds were the India Liberalisation Fund and the JF Thailand Fund. Another 27 funds achieved a frAA rank, while the remaining 18 funds were given a frA rating.
Four funds were upgraded to frAA ratings. They were: Barclays Asian Selection Fund - Thailand, Fleming Flagship Fund India, JF India Trust and HSBC GIF Indian Equity.
Five funds, however, were downgraded. The HSBC GIF Hong Kong Equity Fund and the HSBC Hong Kong Growth Fund went down to a frAA rating following the promotion of the fund manager to chief investment officer.
Guy Boden, lead analyst at Standard and Poors, explained: "We have concerns that this promotion will mean additional responsibilites that are likely to be a distraction from the management of the fund."
Another HSBC fund, the HSBC GIF Chinese Equity Fund came down from frAA to frA following a second year of underperformance.
The other two funds - the Dresdner RCM New Tiger Hong Kong Fund and the Henderson Horizon India Fund - both were downgraded to frA as a result of a change in the fund manager.
Fund managers remain positive about the region, in most instances being close to fully invested.
Although valuations are considered high, managers believe they can be justified. Such continued confidence is based on the fact that strong export-led growth is stimulating local consumer demand.
The region is also a prime beneficiary of the world technology boom.
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