Fund manager sentiment towards Asian has improved in the last quarter, with markets such as China an...
Fund manager sentiment towards Asian has improved in the last quarter, with markets such as China and Korea gaining from a broad upweighting.
The latest asset allocation analysis by offshore fund managers Forsyth Partners shows the average cash weighting on Asian regional funds down at around 1.8%.
Forsyth's analysis reflects a general improvement in sentiment towards global emerging markets, with all areas gaining ground at the turn of the century.
Peter Toogood, head of research at Forsyth Partners, comments: "The strength of the rally seen in Hong Kong, for example, has surprised many investors.
"It was largely inspired by global sentiment and strong capital flows which were expected to remain on the sidelines until Y2K concerns had subsided. The moves in the index typically reflected global trends but were soon reversed early in the New Year."
Toogood adds that expectations for the economy into 2000 remain fairly mixed, with consensus expectations for a further improvement in the domestic economy inspired by strength in China-related consumption and strong export growth.
"In the first six months of 2000, the focus is likely to remain on growth stocks and re-structuring candidates. Growth is expected to accelerate as the year progresses, and domestic consumption will become the key theme for the second half of the year."
While Asian exposure has risen on average, in some instances, the figures do not tell the whole story.
In the case of Forsyth's own asset allocation within Forsyth funds, around a third of the Asian exposure within its Global Emerging Markets fund is directed towards the Indian sub-continent, significantly higher than most competitors. Its approach has been extremely focused and the group sees on-going opportunities.
India has provided excellent returns, particularly during December. Forsyth's asset allocation features positions in the HSBC GIF Indian Equity fund and the India IT fund.
The HSBC fund provides a broader market exposure and should benefit from the recent election results, which are seen to be positive for the corporate sector. The strong performance of the India IT fund reflects a keen interest in Indian IT companies, fuelled by global demand for technology.
Additionally, fears that companies were too dependent on Y2K business have been dispelled as it has become apparent that companies have already shifted their focus towards e-commerce.
Indian IT companies are no longer just technology-specific, but have evolved to become knowledge-based and service-driven. Companies will benefit from significant growth in outsourcing, as choosing India is becoming as much a strategic measure as an issue of cost.
"We particularly like the IT sector," says Toogood. "However, we will need to proceed with caution given that the Indian budget takes place in February."
Forsyth's favoured countries elsewhere in the Asian region are Malaysia, Taiwan, Korea and China. Excluding the Indian sub-continent, the Asian portion of the Forsyth Global Emerging Markets fund accounts for 32% of assets, a decline from 43% in October.
Here, the group features 10 positions with core regional weightings coming from RHB Newly Industrialised Economies fund, INVESCO GT Asian Enterprise fund and HSBC Asian Opportunities fund.
These three positions represent less than a third of Forsyth's Asian weighting and a strong focus has been made through country fund plays into China, Taiwan, Korea, Thailand, Indonesia and Malaysia.
The Korean market has delivered good returns, both through the broadly-based Dresdner RCM AS Korea fund and the tightly-focused Atlantis Korea fund.
By taking a position in Taiwan, Forsyth is looking to gain exposure to cyclicals and semiconductors which are expected to continue to exhibit strong earnings growth, buoyed by continued demand.
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