Tuesday July 23, 8:21 PM
A UNIQUE ASIAN FUND FROM CITIGROUP ASSET MANAGEMENT
By Vasu Menon, Chief Editorial finatiQ
Citigroup Asset Management has just launched a unique close-end Asian fund, the Smith Barney Select Asian Opportunities Portfolio, that's equally invested in a carefully selected and fixed portfolio of 35 stocks from Australia, China, Indonesia, Japan, Korea, Malaysia, Thailand and Taiwan.
The 35 stocks to be included are:
1. Australia's Coca-Cola Amatil and QBE Insurance Group
2. China's Denway Motors
3. Indonesia's Telekomunikasi Tbk PT
4. Japan's Denso Corp, Fuji Heavy Industries, Itochu Corp, Japan Tobacco, Mitsubishi O.S.K. Lines, Promise Co., Sanyo Electric, Sumitomo Corp and Toyota Motor
5. Korea's Hyundai Motor, Kia Motor, Kookmin Bank, Kookmin Credit Card Co., Korea Electric Power Corp, Korea Tobacco & Gindseng Corp, KT Corpo, MCoft Corpo, Samsung Electronics and Samsung Securities
6. Malaysia's Perusahaan Otomobil Nasional
7. Thailand's Advanced Info Services and Bangkok Bank
8. Taiwan's Ambit Microsystems Corp, Asustek Computer, Compal Electronics, Lite-On It Corp, Mediatek Inc, Quanta Computer Inc, Realtek Semiconductor Corp and Ritek Corp.
Purchases can be funded with cash or SRS. Cash purchases must be be made by August 29 while SRS purchases must be made by August 22.
The fund will be priced at $1 and the minimum subscription is $5,000.
Front-end fee varies from 2 per cent to 2.5 per cent depending on the amount purchased.
Management fee is only 1 per cent, compared with 1.25 per cent to 2.25 per cent for many other equity unit trusts.
The fund has an initial life span of about one year, during which time a 1 per cent fee will be imposed for early redemptions. There will be an opportunity to roll-over after maturity.
A second chance to buy into Asia
Those who missed the last Asian rally from September to March/April, now have a second chance to bargain hunt as Asian bourses have pulled back by between 10 and 23 per cent from their highs this year.
Asian markets likely to decouple from Wall Street
Some analysts and fund managers are predicting that Asian bourses will decouple from Wall Street for the following reasons:
1. Valuations in Asia are more attractive than the US. Consequently, global fund managers are starting to shift money out of the US into Asia.
2. Asia went through a crisis five years ago, which forced the region to make changes aimed at tightening accounting standards and improving corporate governance and transparency. In fact, some Asian companies may have become too conservative with their accounting practices in making hefty provisions over the last few years.
3. While the US is seeing a re-emergence of its trade and budget deficits, Asia has enjoyed strong current account surpluses in the last five years. This has helped the region to triple its foreign reserves from US$300 billion to US$840 billion.
4. Unlike the US, spending in Asia has been suppressed for the last few years. Domestic savings have risen and personal borrowings have come off. So we are now seeing a pick-up in spending fuelled by savings. As Asian consumers become more comfortable about economic and employment prospects, bank borrowings will increase, giving domestic spending an additional boost.
Fund managers are bullish on Asia's propects
Recent polls offer good reasons to be bullish on Asia.
The first was a survey of 26 fund managers (managing $51 billion in assets) conducted by the Government of Singapore Investment Corporation (GIC) in mid-June. These fund managers said that Asia remained their top choice. 72 per cent said they will be increasing their equity allocation to Asia in the next 12 months.
The second fund poll that came out strongly in support of Asia was a recent Dow Jones Asian Fund Poll of 12 leading regional fund managers. South Korea, Taiwan and Thailand were highly recommended in the poll.
A recent survey of Asia Pacific fund managers by Merrill Lynch also showed that fund managers expect stock valuations to rise over the next year, projecting an average earnings per share increase of 15.5 per cent for the region. The survey covered 279 fund managers with US$632 billion in assets under management.
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