“Even if growth in the Asian emerging markets has been somewhat diminished of late, the growth rates are still impressive when compared on an international level,” says Dr. Peter Fischer, board member of GAMAX Management AG, speaking about the current status in the investment region of Asia. “In addition, influencing variables, such as the national and consumer debt and demography, speak in favour of an above-average performance of the Asian investment region in the longer term.” However, investors must keep an eye on the development of inflation in Asia in the short and medium-term. If inflation rises too quickly, further liquidity restrictions are likely by the central banks, which would, in turn, have a negative effect on share prices. “Above all, the Chinese decision makers are likely to have learned from the last economic crisis of 2009 and will not risk any excessively rapid deceleration this time,” says Fischer. With the assumption that the monetary deceleration in China will only be moderate, share prices of Asian valuations are likely to pick up again in the course of the second half of 2011. In this respect, China will continue to be the carthorse of Asian growth.
Virtually unnoticed: Asian Small and Mid Caps
In comparison to the industrial countries, the domestic consumption, in particular, of emerging Asian national economies still harbours a lot of potential. Particularly for China, the assumption is that the wage floors will rise at least thirteen percent a year between 2011 and 2015. The plan is to have created about 45 million municipal workplaces by 2015, which should bring about a major boost in consumption. Companies, on which the major investment banks are still not focussing, will also benefit from this. “Many small and mid caps of the Asian investment region are viewed as being extremely attractive, have extremely healthy balances and offer dividend yields of more than five percent,” explains Fischer about the selection process for his Asia fund, which is managed by DJE Kapital AG. “With detailed research and extensive contact with the management, the fund management acquires the necessary information advantage.” In the small caps sector, the stock of Chinese textile corporation Glorious Sun is a good example from the fund portfolio.
The corporation has a converted market value of about €285 million, employs about 28,000 people and achieves a converted annual turnover in the region of €540 million. Glorious Sun is only tracked by a few analysts and fulfils the high investment criteria in terms of balance quality and dividend continuity. The stock of Chinese electronics manufacturer Kingboard Laminates can be allocated to the mid cap segment. The company is a growing, favourably evaluated supplier for the Chinese electronics industry with a converted market value of €1.75 billion.
Japan: Catastrophe demands the attention of investors
A realistic evaluation of the situation in Japan is virtually impossible at this time. However, the Japanese government can be expected to rely heavily on an expansive monetary policy, which should also have positive effect on the Japanese stock exchange in the medium and longer-term. Just before the earthquake catastrophe, the fund management had considered the Japanese stock market somewhat more positively. The predominant reasons for this were the underinvestment of global investors, which has become very strong by now, the very low market values and asset values when compared on an international level and the low profit margins of companies. “Fundamentally favourable valuations with good export transactions, which also benefit from a depreciation of the Japanese Yen, should have a considerable potential for recovery when the situation is stabilised. Companies, which are set to benefit from the rebuilding of infrastructure, are also interesting,” says Fischer. “Investors should keep their eye on the disaster zone of Japan.”
Fund concept aims for continual capital gains
The GAMAX Funds – Maxi-Fonds Asien International has repeatedly received awards in the past. Most recently, the fund received the Austrian Fund Award in the category of “Shares Asian/Pacific with Japan, 3 Years” in March 2011. The investment strategy behind it is one based on strict risk control and aspiring to long-term success. When selecting titles, the fund management relies predominantly on fundamental components and examines factors such as balance quality, dividend yield, quality of management and growth prospects. Monetary and market indicators act as further factors crucial to the decision to purchase. “In view of the 3-year performance, our fund concept has proven itself, particularly for conservative investors who are focused on continual capital appreciation,” explains Fischer.
