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Emerging Asia fund managers positive in outlook, says S&P

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After the most volatile conditions in emerging Asian markets since 1997-1998, Standard & Poor’s Fund Services’ annual review has found fund managers positive in outlook, while recog

After the most volatile conditions in emerging Asian markets since 1997-1998, Standard & Poor’s Fund Services’ annual review has found fund managers positive in outlook, while recognising that the region will be affected by the slowdown in global growth.

‘Having moved as a group into defensives, managers are gradually starting to reposition their portfolios towards more pro-cyclical stocks, which they now see as attractive on valuation grounds,’ said S&P Fund Services lead analyst Roberto Demartini.

At the Comgest Growth India Fund, manager Wojciech Stanislavski and adviser Manish Shah pointed out that the companies they typically invest in – industry leaders with little debt and strong franchises – are those likely to survive the current downturn.

They noted that the current slowdown is linked to a lack of circulation of money, which might result in problems for some Indian banks. Even so, they have started to reduce their positions in highly defensive stocks such as pharma or food companies and are very slowly moving back into engineering and auto companies.

Meanwhile, at HSBC’s Indian Equity Fund, Sanjiv Duggal continues to hold the view that materials were oversold, in particular some of the more defensive names such as Jindal Steel & Power, which is also a utility company.

The team at the Templeton China Fund is looking to move back into more cyclical areas. It currently favours energy stocks and is increasingly aiming to go back into mid- and small-caps.

In contrast, Laura Luo of Schroder’s China Opportunities Fund is more cautious, stressing the recent downturn in the Chinese export sector. She expects more market turbulence in the short term but is positive on the long term.

Concentrating on the smaller market, Martin Lau at the First State China Growth Fund is increasingly looking into rebuilding his Taiwan exposure, having trimmed it back after the bounce back that followed the Taiwan election.

At the Jupiter China Fund, Philip Ehrman remains positive on his current portfolio. He continues to avoid export-oriented areas on valuation grounds and had reduced exposure to property, industrial cyclicals, steel and cement, where he feels supply had caught up with demand. He continues to emphasise environment-related companies.

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