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Wednesday 4 February 2009
Funds Turn To Asian Stocks, Favour China
Bonds continued to be the most favoured asset class by global asset managers, but January was a month when investors began to increasingly favour Asian equities, with Chinese stocks leading the way.
HONG KONG (Dow Jones)--Bonds continued to be the most favoured asset class by global asset managers, but January was a month when investors began to increasingly favour Asian equities, with Chinese stocks leading the way.
For much of last year, fund managers held higher than usual cash positions amid roller coaster market conditions. The high cash positions have also been in preparation for redemption from panicky investors.
But cash is now coming out of favour among investors, although funds were still overweight on cash in January. Bond preference stayed strong, and for the first time since December 2007, funds were overweight on stocks, according to Dow Jones' monthly poll of portfolio managers active in Asia for January.
Weightings reflect managers' portfolio composition compared with benchmark indexes. Fund managers said that low interest rates make cash attractive, but falling inflation and weak growth support bonds. J.P. Morgan Asset Management said that within bonds, it preferred those with a "modest long duration position", such as Japanese bonds.
Equities had the prospect of dismal corporate earnings hanging over them, but fund managers were increasingly optimistic. "For equities, we're anticipating further volatility, but it is a stock picker’s market and economic growth in Asia will slow but not slump," said Douglas Cairns, Asia & Emerging Market equities investment specialist at Threadneedle.
Asian stocks, excluding Japan, are trading at prospective price-earnings ratios of 9 times, and dividend yield ratios of 4.5% , according to fund manager Invesco.
Topping the list of favourites is China, turning overweight in average portfolios for the first time in more than two years.
"China is our single largest overweight position," said Threadneedle's Cairns. "Domestic consumption remains resilient, and while there's a cyclical slowdown, infrastructure spending, boosted by the stimulus package, should grow."
In November, China said it planned to spend four trillion yuan ($581 billion) on a stimulus package that focuses on railways, airports and other hard assets. Fund managers said that the huge package will, hopefully, offset some of the decline in the country's export growth.
Last year, China's benchmark Shanghai Composite Index, which covers both A and B shares listed on the Shanghai Stock Exchange, fell 65% ; In comparison, the Dow Jones Industrial Average fell 30% .
Trailing Chinese stocks as slight overweights were Hong Kong, Singapore, Philipines, Thailand and India. Hong Kong has China to thank for its relative buoyancy, despite an ongoing economic slowdown.
"The Hong Kong economy has proven to be more resilient than expected given the slowdown of external demand from developed economies," Invesco said. "Consumption has been holding up relatively well, thanks to consumers from China supporting the local retail trade in Hong Kong."
Export-dependent South Korea and Taiwan joined Malaysia, Australia and Zealand as among the least favoured markets for equities in the region.
Each month, Dow Jones Newswires surveys fund managers on portfolio weighting recommendations for the succeeding months, with most looking at a 12-month horizon. This latest survey was taken over the past 10 days. The respondents for this month's survey were Aberdeen Asset Management, Credit Agricole Asset Management, Fortis Investments, Invesco, JP Morgan Asset Management, Schroeder Investment Management, Standard Life Investments and Threadneedle Asset Management.
For the survey, each participant was asked to assign recommendations to each asset class. The weightings from each fund manager were then averaged: 0 is neutral, up to +0.5 is slightly overweight, above +0.5 to +1 is overweight, above +1 is very overweight. Meanwhile, 0 to -0.5 is slightly underweight, below -0.5 to -1 is underweight, below -1 is very underweight. As the poll wasn't conducted in December, the figures compare January 2009 to November 2008 and before.
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Funds Turn To Asian Stocks, Favour China
By Nisha Gopalan
29 January 2009
HONG KONG (Dow Jones)--Bonds continued to be the most favoured asset class by global asset managers, but January was a month when investors began to increasingly favour Asian equities, with Chinese stocks leading the way.
For much of last year, fund managers held higher than usual cash positions amid roller coaster market conditions. The high cash positions have also been in preparation for redemption from panicky investors.
But cash is now coming out of favour among investors, although funds were still overweight on cash in January. Bond preference stayed strong, and for the first time since December 2007, funds were overweight on stocks, according to Dow Jones' monthly poll of portfolio managers active in Asia for January.
Weightings reflect managers' portfolio composition compared with benchmark indexes. Fund managers said that low interest rates make cash attractive, but falling inflation and weak growth support bonds. J.P. Morgan Asset Management said that within bonds, it preferred those with a "modest long duration position", such as Japanese bonds.
Equities had the prospect of dismal corporate earnings hanging over them, but fund managers were increasingly optimistic. "For equities, we're anticipating further volatility, but it is a stock picker’s market and economic growth in Asia will slow but not slump," said Douglas Cairns, Asia & Emerging Market equities investment specialist at Threadneedle.
Asian stocks, excluding Japan, are trading at prospective price-earnings ratios of 9 times, and dividend yield ratios of 4.5% , according to fund manager Invesco.
Topping the list of favourites is China, turning overweight in average portfolios for the first time in more than two years.
"China is our single largest overweight position," said Threadneedle's Cairns. "Domestic consumption remains resilient, and while there's a cyclical slowdown, infrastructure spending, boosted by the stimulus package, should grow."
In November, China said it planned to spend four trillion yuan ($581 billion) on a stimulus package that focuses on railways, airports and other hard assets. Fund managers said that the huge package will, hopefully, offset some of the decline in the country's export growth.
Last year, China's benchmark Shanghai Composite Index, which covers both A and B shares listed on the Shanghai Stock Exchange, fell 65% ; In comparison, the Dow Jones Industrial Average fell 30% .
Trailing Chinese stocks as slight overweights were Hong Kong, Singapore, Philipines, Thailand and India. Hong Kong has China to thank for its relative buoyancy, despite an ongoing economic slowdown.
"The Hong Kong economy has proven to be more resilient than expected given the slowdown of external demand from developed economies," Invesco said. "Consumption has been holding up relatively well, thanks to consumers from China supporting the local retail trade in Hong Kong."
Export-dependent South Korea and Taiwan joined Malaysia, Australia and Zealand as among the least favoured markets for equities in the region.
Each month, Dow Jones Newswires surveys fund managers on portfolio weighting recommendations for the succeeding months, with most looking at a 12-month horizon. This latest survey was taken over the past 10 days. The respondents for this month's survey were Aberdeen Asset Management, Credit Agricole Asset Management, Fortis Investments, Invesco, JP Morgan Asset Management, Schroeder Investment Management, Standard Life Investments and Threadneedle Asset Management.
For the survey, each participant was asked to assign recommendations to each asset class. The weightings from each fund manager were then averaged: 0 is neutral, up to +0.5 is slightly overweight, above +0.5 to +1 is overweight, above +1 is very overweight. Meanwhile, 0 to -0.5 is slightly underweight, below -0.5 to -1 is underweight, below -1 is very underweight. As the poll wasn't conducted in December, the figures compare January 2009 to November 2008 and before.
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