| Helping insulate Asian markets from global credit squeeze |
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Page 1 of 2 Speaking following the release of interim results to the London Stock Exchange for Pacific Assets Trust plc, F&C fund manager Peter Dalgliesh points out that investors in the region are less impacted by the credit turmoil that has hit the US, UK and Europe in recent weeks thanks to an "abundance of liquidity."Pacific Assets Trust reported a stellar set of results this morning with an increase in it's NAV of 38.8% over 6 months to the 31st July 2007 putting in first place in its AIC peer group of eight companies. Significantly, it also beat all but one of its open ended equivalents in the IMA Asia Pacific ex Japan sector, which comprises some 75 funds. While Pacific Assets Trust is not constrained by any benchmark, the MSCI All Country Far East Free (ex Japan) Index returned just 23.2 per cent over the same period. Peter Dalgliesh, who joined F&C to manage Pacific Assets Trust last June from Gartmore Investment Management, attributes performance to the region's domestic demand story, property price inflation and global infrastructure expenditure. He said although Asian markets were by their very nature more volatile, investors in the region were less affected by the credit turmoil engulfing many other major markets. "As the manufacturing backyard of the developed world, Asia will inevitably suffer on the back of a revision in global GDP growth, but the abundance of liquidity in Asian financial markets, especially in China, has insulated the region from many of the problems emanating from the global credit squeeze. "We have been overweight China, which has experienced very strong corporate earnings growth, faster than expected GDP growth and negative real interest rates. The country's banks are well funded and comfortably in excess of the reserve requirement ratio imposed by the People's Bank of China, and although inflation has spiked up this year on the back of food price inflation, this is a supply driven problem which is unwinding as we speak. With an increase in state supplied crops and animal stocks coming to market this should see inflation roll over by the end of the year." Dalgliesh said that whilst valuations in the local Chinese A share market seemed excessive, the company's exposure to the H share market of Chinese managed companies listed in Hong Kong which are trading at material discounts to their A share counterparts, was a huge source of positive attribution. "We continue to identify strong themes in China where we believe there is further room for multiple uplifts. These include transport and infrastructure, raw materials and the environment. As the hot topic of recent months, the environment is likely to feature high on the government's agenda when it convenes at its next 5-year congressional meeting this October. We strongly favour China Water Affairs in this space. The company's political connections and the integration route it is pursuing to include extended water pipeline infrastructure, hydro-electric damns and even Seabuckthorn plantations (a bush which stabilises soil erosion) presents great opportunities. |
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