Prospects for Asian equities

It has been a challenging year so far for Asian equities. In the first half alone, markets had to grapple with, among other things, the pressure posed by raw material shortages, interest rate fears and high energy prices. While the market has weathered most of these events rather well, investors have remained cautious amidst concerns over a potential slowdown in global economies, especially in China. A weakening dollar has also heightened market volatility.

Many investors are wondering if there are still good reasons to invest in the Asian markets now. We believe that there are good prospects for Asian equities in view of strong domestic economies, under-valued currencies, high domestic savings and improving governance and capital management. In addition, there are powerful themes which could generate investment opportunities for the market. For example, a weaker US dollar means new outsourcing opportunities resulting from the strength in the Yen and Euro, which would be positive for the lower-cost Asian economies.

In the move to a more defensive stance, investors have sold off stocks indiscriminately, and this provides opportunities for the long-term investor. Our strategy is to focus on companies and sectors that will gain competitive advantage and benefit as the Asian economy recovers.

To position themselves for the growth opportunities in Asia, investors could consider investing in Asian equity funds managed by DBS Asset Management Ltd ( DBSAM).

• Shenton Asia Pacific Fund: This broadly diversified fund in the Asia Pacific Ex-Japan category has delivered offer-tobid returns of 11.2%pa and 25.0%pa over 1 and 3 year periods as at 30 Sep 04.
• Asia Knowledge Fund: This fund focuses on our best ideas in Asia and is managed on an absolute return basis. Its returns on offer-to-bid basis over 1 and 3 year periods as at 30 Sep 04, are 9.5%pa and 26.1%pa respectively.
• Shenton Twin City Fund: This fund invests in developed Asian economies and has concentration in Singapore and Hong Kong. The offer-to-bid returns for 1 and 3 year periods as at 30 Sep 04 are 23.3%pa and 22.9%pa respectively.

Source: DBS AM.