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The pick of the pac

Franki Chung, deputy head of Asian equities, Baring Asset Management

Despite a torrid year for the Asia-Pacific ex Japan region, the green shoots of recovery are evident in the Chinese economy and the technology and infrastructure sectors.

It has been a very tough economic and equities’ environment for the last 18 months but now we are starting to see an improved outlook and better growth prospects for the region.

China is one of the driving forces of economic recovery and we are confident of better nominal GDP growth this year.

I am looking for sequential improvement in the tech sector in the second half of the year, particularly upstream semi-conductor companies such as Taiwan Semi Conductor.

Infrastructure firms will also benefit from government packages, especially in China, which will in turn benefit the banks financing the projects.

Banking systems here in Asia, compared with Europe and the US, are relatively healthy.

Allan Liu, fund manager, Fidelity South-east Asia fund

China has been the poorest performer in the region. Q4 especially saw an accelerated decline and, having seen double-digit growth for some years, 2008 saw reduced annualised growth of 6.8 per cent. As a result, consumer and business confidence has fallen in the country.

However, the government’s series of fiscal packages has led us to be overweight in China.

Companies that will benefit from the government bailout, such as infrastructure firms and real estate companies will also benefit.

Insurers in the region have also caught the eye, in view of an emerging middle class in Asia-Pacific.

Hugh Young, managing director, Aberdeen Asset Management Asia

Although the long-term outlook for Asia is positive and markets look fair value, near-term equity performance will depend on the severity of the economic shock.

Fortunately, many companies are well positioned to withstand the slowdown before monetary and fiscal stimulus measures take effect.

Across sectors, many Asian companies have low levels of debt and are producing all-important healthy free cashflow.

On the downside, many remain heavily reliant on exports to Europe and the US.

Aberdeen’s portfolio positioning continues to reflect where the team finds well-run, attractively valued companies.

Although the Singaporean economy has slipped into recession, the country continues to be a major overweight as a home to solid companies operating across Asia.

India, with its wealth of well run companies, remains another key overweight despite the Satyam fraud scandal.

On the other hand, we have been underweight mainland China for some time, despite its impressive economic growth potential. With quality Chinese-listed companies run for shareholders still thin on the ground, the team prefers Hong Kong-listed stocks.

Richard Evans, co-manager, Martin Currie Asia Pacific fund

The Asia-Pacific excluding Japan region offers great opportunities for investing defensively.

The real money-making opportunities will emerge in the medium term as earnings’ momentum turns more consistently positive. When we do get to that point, it is worth remembering the stratospheric return potential of owning a strong franchise in the early stages of recovery.

China has not escaped the economic slowdown of the West and its deflated mood will have an impact on the wider region. A real slowdown in economic activity, even of a much lesser magnitude to that being seen elsewhere, is surely causing a shock to the system after an extended period of such strong growth.

Export growth will be hampered for the next few years, yet infrastructure firms will benefit from the government stimulus package.

Stuart Parks, head of Asian equities, Invesco Perpetual

Our portfolios are currently positioned to benefit from a market recovery and we remain confident of the long-term outlook for Asian markets.

In general, we maintain our focus on businesses that have sustainable earnings’ growth, strong market positions and franchises, healthy balance sheet positions and solid cashflows.

Domestic demand is an important theme, based on positive demographics and savings trends in Asia.

The largest underweight is in banks, where the likely growth in non-performing loans could have a negative impact on earnings.

But elsewhere in financials, we are overweight the insurance sector where we see sustainable growth prospects and attractive valuations.

We are also underweight utilities, which we see as expensive and offering limited growth prospects.

Hong Kong is the largest geographical weighting, as we believe it has quality businesses that can benefit from China’s long-term growth potential and from exceptionally low levels of US interest rates.


‘Rift’ at Cobalt

A Cobalt Capital director has admitted a rift in the senior management and has called for directors to pull together. Director Julian Ingalls would not comment on immediate concerns over the brokerage but says: “Senior management and partners have not seen eye to eye and have disagreed about several things. People need to pull together in situations like this.”


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