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Julian Gibbs

The Far East excluding Japan is my nap selection for the best-performing sector over the next year.

This is for several reasons. First, when the US economy recovers – and it looks likely to grow by nearly 4 per cent next year – the Far Eastern economies and stockmarkets will recover even quicker. Second, growth rates in the Far East are mainly already high and fast improving.

Third, earnings&#39 growth is likely to rise by an average of 20 per cent a year over the next two years, which should lead to the markets rallying much further. Fourth, the Sars epidemic held back the Far Eastern markets but is now over. In China, the Hang Sang index hit a four-and-a-half-year low but is rising again strongly.

Fifth, the strong euro means that Asian firms are gaining market share in Europe. Sixth, share valuations are only around 40 per cent of what they were seven years ago. And last, a lot of companies across Asia are generating a great deal of cash and are able to pay growing dividends.

My favourite Far Eastern fund by far is Exeter Pacific growth, managed by Richard Scott. It is likely to be more volatile than some others because it invests almost entirely in Far Eastern investment trusts, many of which stand at discounts and have reasonably high gearing, but these factors should lead to enhanced performance.

I also like Newton Oriental, First State Asia Pacific and Fidelity South-east Asia although the latter has performed poorly over the last two years. In the investment trust field, Aberdeen Asia smaller companies, Scottish Oriental smaller companies and Henderson Far East income all have excellent performances over the last three years of between 42 and 65 per cent upwards.


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