For Soo Nam Ng, the Singapore-based portfolio manager for Nikko Asset Management’s Asia Pacific ex-Japan Fund, being overweight on China last year caused ove
For Soo Nam Ng, the Singapore-based portfolio manager for Nikko Asset Management’s Asia Pacific ex-Japan Fund, being overweight on China last year caused overall returns to underperform those of the MSCI Pacific ex-Japan Index, albeit slightly. “Annualised absolute returns were +12 per cent but over a three-year period our cumulative returns are +22 per cent, outperforming the market by +22.4 per cent,” said Ng in a telephone interview with Hedgeweek. Asia’s equity markets faced a number of headwinds in H110 with Ng admitting that in Q1 Asia’s policy cycle was quite negative.
“When policy makers started tightening there was a market correction and this carried over into Q2, but in H210 the markets started to recover and we saw strong corporate earnings recovery,” said Ng, who, along with a team of four other colleagues, stock picks mid to large-cap companies with more than USD1.5billion in market capital. China’s monetary tightening policy to curb inflation, which had risen steadily to 5.10 per cent in November, saw the Shanghai Composite Index down -13.4 per cent for the year. But Ng believes that China’s interest rate hikes have been factored into its markets for 2011. “I’m bullish on China. Indonesia and Korea, I believe, are behind the curve, they’ll have to tighten this year,” said Ng.
Resources stocks across the region (e.g. coking coal in Australia), and agricultural commodities including palm oil stocks in Indonesia and Malaysia contributed strong returns, but Ng believes that, whilst commodities this year look attractive, investors will need to be more selective in terms of exposure. “Platinum and iron ore should do well, as well as soft commodities like rubber,” explained Ng, adding that he was also positive on technology stocks, in particular those in Korea and Taiwan. Long-term, Ng said that he also saw “a lot of value in China banks”. The fund’s portfolio typically holds around 50 stocks at any given time. And whilst not the biggest of Nikko AM’s funds, Ng says he’s keen to get the fund to the USD100million mark “as quickly as possible”. “We have a strong track record and a lot of capacity to attract new capital but it’s a chicken and egg situation – as funds get bigger and reach capacity they tend to get performance constraints. Our fund has a USD1billion capacity because we only focus on mid to large-cap companies,” said Ng. Capital raising this year will be conducted by Ng’s colleagues in New York and London, as well as Asia.
