EQUITIES ASIA EX CHINDIA
“
The story of the
next decade, I would
venture, will be the
importance of China
initially, and then
India, as export
destinations in their
own right
”
Tony Hann, head of emerging
market equities, Blackfriars
Asset Management
SUMMARY
When looking at Asia, it is
hard to see beyond China and
India given their economic
standing on the global stage.
Investors, however, are always
looking for alternative ways to
take advantage of the Chindia
story without necessarily
investing directly.
As a result, they are looking at
investment in those countries
that trade with and benefit
from intricate links to Chindia,
namely those most closely tied
geographically
Top 10 ASEAN funds
M’star Fund Curr 1 year 3-year 3-year 3-year 3-year 3-year Launch Domicile
Rating size (£m) chg (%) chg (%) Sharpe Sortino Alpha Beta date
FF - ASEAN A $ ★★★ 331.78 $ 63.30 12.91 2.17 7.96 -5.28 0.98 1 Oct ’90 Luxembourg
JF ASEAN ★★★ 1,100.91 $ 77.73 9.93 2.30 10.20 -1.93 1.07 7 Jul ’83 BVI
Invesco ASEAN Equity C ★★ 138.63 $ 64.59 9.23 2.30 9.72 -1.19 0.92 31 Jan ’79 Ireland
Legg Mason SEA Spec Situations ★ 197.39 S$ 132.10 15.74 2.04 11.00 -9.39 1.70 2 Mar ’98 Singapore
TNI UAE Blue Chip – – AED 9.90 -0.72 – – – – 1 May ’05 UAE
WIOF South-East Asia Perf’nce B – 804.73 $ – – 2.19 7.64 2.64 0.40 1 Dec ’08 Luxembourg
Baring ASEAN Frontiers A € – 269.42 € 84.10 – 2.42 12.70 2.13 1.06 31 Jul ’08 Ireland
CA Resona ASEAN – 80.92 Y 62.01 – 1.94 9.68 6.64 0.73 18 May ’07 Japan
CAAM Funds ASEAN New Markets C – 119.37 $ 60.67 – 1.98 7.43 -10.57 1.04 19 Apr ’07 Luxembourg
CIMB Principal ASEAN Equity
Source: Morningstar
– – MYR 58.11 – 2.13 8.58 -5.45 0.92 3 Oct ’07 Malaysia
place to set up low-cost
manufacturing operations,
he notes, adding: “But the
story of the next decade,
I would venture, will be
the importance of China
initially, and then India, as
export destinations in their
own right”.
l Fruits of the crisis
As for Henderson Global
Investors’ Michael Kerley,
even though China is the
country in which his Far
East Income Fund is most
invested – with about a
21% share – Hong Kong is
his second favourite with
an 18% exposure.
He regards Hong Kong
as a separate entity from
China, of which it is technically
a special administrative
region, owing to its
more open economy and
separate, US-dollar-pegged
currency.
Taiwan accounts
for another 14% of the
fund, Singapore for 13%,
Australia 10.5%, Thailand
8.7% and South Korea
7.6%. Kerley also has about
2% in both Indonesia and
the Philippines.
“From an economic
standpoint, many of these
countries came into this
downturn pretty well prepared,
on the back of current
account surpluses typically
built up from exports
over the past few years,”
Kerley says.
“So their debt-to-GDP
levels are quite low, which
has given them plenty of
room to introduce fiscal
stimulus measures, which
have largely been successful,
though some have been
more so than others.”
While the medium to
long-term outlook for
many of the Asia ex-
Chindia countries was
always going to be good,
he adds, the recent global
financial crisis may actually
have improved it.
“That is because it has
Asia ex-Chindia countries
meant that these governments
now have to focus
more on domestic growth,
and not rely so much on
exports,” he explains. “So
ultimately we will get a
more structured, or balanced,
growth profile and
not be reliant on exports
for growth.”
l Knowing the facts
He also points out that
there are other factors fuelling
growth in some of the
smaller Asian markets that
have nothing to do with
China or India, but the still-
Country Population (m) GDP per capita ($)
Australia 22.07 46,824
Burma/Myamar 50 448
Cambodia 14.8 823
Hong Kong 7.01 30,726
Indonesia 231.37 2,239
Laos 6.32 859
Malaysia 28.3 8,118
Philippines 92.23 1,845
Singapore 4.99 38,972
South Korea 48.33 19,136
Sri Lanka 20.24 1,972
Taiwan 23.07 16,998
Thailand 63.4 4,116
Vietnam 85.79 1,042
TOTAL 697.92 12,436 (average)
China 1,334.53 3,259
India 1,173.48 1,017
Source: United Nations estimates, respective governments, IMF
important western markets
dominated by the US and
Europe.
One of the fastest-growing
sectors in the Philippine
market, for example, he
notes, is call centres that
cater for English-language
businesses, a result of the
Philippines being one of
the only English-language
speaking countries in Asia.
But as the recent collapse
of Dubai World has
reminded investors, there
are hazards in putting too
much faith in relatively new
and untested markets.
For this reason, those
who invest in Asia ex-
Chindia tend to have an
encyclopaedic knowledge
of the history of each of
the countries, and what
appears to be a healthy
degree of caution.
Henderson’s Kerley, for
example, says he regards
Vietnam and Sri Lanka
as uninvestable at the
moment, and points out
that Thailand is a higher
risk than some of its neighbours
as a result of ongoing
political instability.
Hann shares Kerley’s
concerns about Thailand,
and says he and his team
do not really cover Sri
Lanka at the moment,
although there are plans
to launch a frontier fund
in 2010 in which it might
find a place.
42 PORTFOLIO ADVISER [www.portfolio-adviser.com] JANUARY 2010
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