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DJ ASIA FUND POLL: Fund Managers Like China, India, Indonesia (2009/07/30 15:57PM)

By Ellen Sheng
Of DOW JONES NEWSWIRES

HONG KONG (Dow Jones)--China, India and Indonesia stock markets remained fund manager favorites during the month of July, as increased optimism about the economic outlook whetted appetite for emerging markets.
International fund managers surveyed by Dow Jones became "overweight" on Asian emerging markets stocks this month, compared with a consensus "neutral" position in June. Managers active in the region are fairly concentrated on China, India, Indonesia, as well as Hong Kong, with other Asian country holdings at "neutral" or "underweight." Weightings reflect managers'' portfolio composition compared with benchmark indexes.
Investors have been warming up to China''s prospects as a growth driver in the Asia Pacific region. Domestic growth in the populous country is being driven by loose monetary policy and bank lending. China''s hefty stimulus packages are also supporting growth.
Encouraged by hiked earnings expectations and other signs, some market houses such as Threadneedle recently raised their expectations for gross domestic product growth this year to 8% from 7%.
"Though the export sector will have to start improving at some stage, China''s market share with certain export sectors has already increased and the government continues to have the means to initiate more stimulus measures should the U.S. recovery be delayed further," said Simon Godfrey, investment specialist for Pan Asia ex-Japan equities at Fortis Investments in Hong Kong.
Sectors poised to benefit from domestic growth such as consumer goods are particularly popular. Despite the market rally so far this year - The Shanghai Composite Index is up 10.38% thus far in July and up nearly 80% for the year - fund managers say valuations are still reasonable as they are below peak levels in 2007.
Hong Kong, as the longtime gateway to China, also remained on fund managers'' screens, though with some caveats.
Hong Kong is "a defensive market overall compared to the rest of Asia," said Fortis'' Godfrey. Large-cap stocks tend to be major banks, property and utilities companies and with a cyclical recovery taking place in the region''s largest economies, there is greater potential elsewhere and in other sectors, particularly consumer stocks, he said.
Like China, fund manager interest in Indian and Indonesian stocks is also a play on optimism about domestic growth.
India''s 2009 GDP growth, expected to be around 6% and 7%, is the second highest in the region and goods and services exports make up a smaller portion of GDP than more developed economies such as Taiwan or Hong Kong. The country''s relatively insulated economy has made investors optimistic about consumer consumption while government-sponsored infrastructure investments is spurring interest in infrastructure.
The Bombay Sensex 30 Index rose about 4.7% in July and is up 57.3% year to date. Given the rally, some fund managers are being more selective. Threadneedle, for instance, says it is underweight India in the near term while Fortis said it has taken some profits in financials and property stocks, which have full valuations after a strong second quarter.
Indonesian stocks, which became a favorite last month, continue to be popular. Fund managers noted that the country''s economy is more domestic driven, rather than export-driven, making it attractive in the current environment.
"Indonesia''s fundamentals continue to improve steadily," noted Invesco, which has been encouraged by the landslide victory of President Susilo Bambang Yudhoyono and his mandates to accelerate economic reforms. Moreover, Indonesia remains one of the cheapest markets in the region, the fund manager said.
Equities are back in fund managers'' good graces this month after being trumped by cash and bonds for several months. Managers were "overweight" equities - and particularly emerging markets stocks in July. Managers were only "slightly overweight" bonds and "underweight" cash. Emerging market equity funds and Asia ex-Japan equity funds saw mostly inflows during July, but with some occasional outflows. Global emerging markets equity funds posted big inflows in the third week of July, absorbing a net $1.08 billion, while Asia ex-Japan equity funds raked in US$973 million, according to Boston-based fund tracker EPFR Global.
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 week. The respondents for this month''s survey were Aberdeen Asset Management, Credit Agricole Asset Management, Fortis Investments, Invesco Ltd., J.P. Morgan Asset Management, ING Asset Management, Mirae Asset Global Investments, Schroder Investment Management Ltd., Standard Life Investments and Threadneedle.
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. OVERALL GLOBAL WEIGHTINGS
July09 June May April March Feb
Cash -0.50 -0.25 0 +0.25 +0.25 0
Bonds +0.25 +0.50 +0.50 +0.50 +0.25 +0.75
Equities +0.50 0 0 0 +0.25 +0.25
Commodities +0.25 +0.25 +0.25 -0.50 0 --

GLOBAL BONDS July09 June May April March Feb
Asia ex-Japan +0.50 +0.50 +0.50 +0.50 +0.25 -0.25
Japan -0.25 -0.25 -0.25 -0.50 0 +0.50
North America -0.25 +0.25 0 -0.50 -0.25 0
Europe 0 +0.25 0 -0.25 +0.25 +0.25
Non-Asian +0.75 +0.50 +0.50 +0.25 +0.25 +0.25
emerging mkts

GLOBAL EQUITIES July09 June May April March Feb
Asia ex-Japan +0.50 0 +0.25 +0.50 +0.25 +0.25
Japan 0 -0.50 -0.25 -0.25 -0.50 0
North America -0.25 0 -0.25 0 +0.25 +0.25
Europe -0.25 +0.25 0 -0.25 0 0
Non-Asian +0.50 +0.25 +0.25 +0.25 0 -0.25
emerging mkts

ASIAN EQUITIES July09 June May April March Feb
Japan -0.25 -0.50 -0.25 -0.25 -0.50 -0.50
China +0.75 +0.50 +0.50 +0.50 +0.50 +1.25
Hong Kong +0.50 0 +0.25 +0.50 +0.25 +0.25
Taiwan -0.25 -0.50 -0.25 -0.25 -0.25 -0.50
South Korea 0 -0.25 0 -0.25 -0.75 -1.25
Singapore 0 0 -0.25 0 +0.25 +1.00
Indonesia +0.50 +0.50 +0.50 +0.25 +0.25 +0.25
Philippines 0 0 -0.25 0 0 +0.25
Thailand 0 0 0 0 +0.25 +0.25
Malaysia -0.75 -0.50 -0.50 -0.50 -0.50 -1.00
Australia -0.75 -0.25 -0.25 -0.25 -0.50 -1.00
New Zealand -0.50 -0.75 -0.75 -0.50 -0.50 -1.00
India +0.50 +0.75 +0.75 +0.25 +0.50 +1.00

-By Ellen Sheng, Dow Jones Newswires; 852-2832-2336; ellen.sheng@dowjones.com
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(END) Dow Jones Newswires
July 30, 2009 03:57 ET (07:57 GMT)
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