U.S. economy woes push Asia funds to domestic plays

Fund managers, many of whom have touted the virtues of Asian consumption plays such as China Mobile and Bharti Airtel for a year or more, say the dire string of U.S. economic data only strengthens the case for investing in the sectors that benefit most from Asia’s robust economies.

They said the bad U.S. news is also forcing them to take a harder look at export-heavy markets such as Japan and South Korea.

“The one pocket of growth for now at least is Asian consumers, particularly in China and India,” said Anthony Muh, head of Asia Pacific for AT Asset Management, which manages about US$1 billion in regional equities.

“We’ve been pulling back on cyclicals, on the export sector, and adding more to domestic consumption and raising a little bit of cash to keep our powder dry to take advantage of some of the pullbacks.”

He said stocks the firm holds that reflect this theme include China Mobile and Bharti Airtel, the leading mobile phone service providers in the world’s two most populous countries.

Both firms have seen profits surge as more Indians and Chinese buy mobile phones. And unlike exporters, they are unlikely to feel much, if any, impact from slowing U.S. growth.

China Mobile shares have fallen about 1.8 percent since the start of the year, compared with a 2.6 percent dip in MSCI’s index of Asia Pacific stocks outside Japan.

That index has weakened since a Jan. 4 report that the U.S. unemployment rate hit a two-year high of 5 percent in December.

In anticipation of a slowdown, Allianz-owned fund house RCM has shifted its US$17 billion Asia Pacific portfolio away from Asian exporters and Japanese stocks in general, said Mark Konyn, chief executive of RCM Asia Pacific.

Japanese stocks slid Thursday to an 18-month closing low, dragged down by automakers including Toyota Motor Corp., Honda Motor Co. Ltd. and Nissan Motor Co. Ltd.

“The Japanese economic recovery has been totally built on the performance of the export sector,” he said.

“In most of the rest of Asia, there’s an opportunity for substitution. We’ve significantly shifted away from exporters, more to domestic consumption plays.”

Konyn, who declined to name specific companies, said preferred sectors include retail, telecoms, construction and infrastructure and that it is overweight Hong Kong property stocks.

Major holdings at the end of November included China Mobile and Hong Kong’s Kerry Properties Ltd., according to factsheets on the company’s funds.

Fund managers said that while further Asian market declines were a strong possibility, they were not bearish enough to massively raise cash levels or shift into traditional safe havens like utilities, which typically have low growth but steady dividends.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos Respond to this email