Barings narrows portfolio focus to Southeast
Asia
By Rita Raagas De Ramos | 12
August 2008
Baring Asset Management has converted a Pacific Fund
launched in 1978 into a portfolio that invests mainly in the core Asean markets
of Singapore, Malaysia, Indonesia, Thailand and the Philippines.
advertisement
Baring
Asset Management has converted its Pacific Fund to a portfolio that focuses on
Southeast Asian markets.
The Baring Asean Frontiers Fund will invest
mainly in Southeast Asia, but will also have a small exposure to Greater China.
The fund is the result of demand from Baring’s clients for exposure to the
opportunities available in the smaller and faster-growing markets in
Asia.
“More than a decade on from the Asian financial crisis of 1997, we
believe Asia’s tigers are ready to pounce again,” says SooHai Lim, the Hong
Kong-based manager of the Baring Asean Frontiers Fund. “Government and
corporate
balance sheets have restructured, current account deficits have turned into
surpluses, fiscal deficits have been reined in, and local currencies are on the
rise.”
Lim isn’t just talking theory when recalling the history of
financial markets in Southeast Asia and comparing that to developments over the
past decade. He has been investing in select Asean markets for more than a
decade and had exposure to Thai equities at the height of the 1997 crisis
triggered by the devaluation of the Thai baht.
Baring Asset Management
believes the markets with the greatest growth potential include Singapore,
Malaysia, and the Philippines. “We think this is an exciting block of countries
to look at,” says Lim.
With a total population base of over 550 million,
and a combination of rich natural resources and world-class business expertise,
the fund house expects the major Asean economies to deliver stronger growth in
the medium- to long-term.
Most investors have focused on “the remarkable
changes taking place in China”, says Lim, neglecting other markets in Asia. (In
February, Baring Asset Management launched the Baring China Growth Fund and the
Baring China Select Fund, which invest in companies that stand to benefit from
the economic growth and development of China.)
Singapore, for example, is
arguably the most developed market in Asia ex-Japan and has repositioned itself
as an alternative private banking centre for wealthy Asians and investors from
the Middle East and Europe, Lim says.
Lim likes Singapore because
valuations are attractive and, with inflation on the rise, there are risks that
policy errors might take place in other markets in the hands of less
experienced
policymakers.
“Singapore has had a good track record of policy
execution, so we are comfortable that they will actually be able to take the
right measures to handle this,” he says.
Indonesia, Malaysia and
Thailand, meanwhile, are major suppliers of commodities to their neighbours in
Asia.
“We like Indonesia on a longer-term
basis because it has the population base to be a sizeable consumer market,” Lim
says. “It is also a huge commodities exporter. It exports a lot of coal,
exports
a lot of palm oil and therefore is an indirect beneficiary of the rise of China
and India.”
Other markets have their own appeal. The
Philippines’ “most successful export” is its well-educated English speaking
population found all around the world, Lim says, and this is underwriting an
economic boom back home through the remittance of their hard-earned
savings.
Around 80% of the Baring Asean Frontiers Fund will be invested
in the “core” Asean markets of Singapore, Malaysia, Indonesia, Thailand and the
Philippines. Around 10% will be invested in the up-and-coming frontier markets
such as Vietnam and the non-Asean markets of India and Sri Lanka. The balance
will have exposure to the non-Asean market of Greater China.
“The fund’s
exposure to Greater China and the frontier economies allows investors to
benefit
from the changes taking place there,” Lim says. “Vietnam, for example, is
emerging as an attractive, low-cost alternative to China for companies looking
to diversify their manufacturing. With growth forecasts looking favourable, we
believe Vietnam’s nascent equity market could well follow China’s meteoric
rise.”
The Irish-domiciled fund will employ an actively managed strategy
using a growth-at-a-reasonable-price investment philosophy, but will be
benchmarked against the MSCI Southeast Asia Index. The portfolio is expected to
have around 40 to 50 stocks.
The portfolio’s predecessor, the Baring
Pacific Fund, was launched in 1978. Most recently, it was managed by Henry
Chan,
head of Asian equities at Baring Asset Management. It invested in the Pacific
and Pacific Rim region including Australia, Chile, Hong Kong, Indonesia, Japan,
Korea, Malaysia, Mexico, New Zealand, Singapore and Thailand.
