Pinning their hopes on an Asian acceleration
im Guinness offers a somewhat unusual reason for Americans to invest in the Asian mutual funds his firm manages: "There isn't much choice," he says.
There aren't many "no load" (no sales fee) mutual funds available that invest solely in non-Japan Asia or in China, says Mr. Guinness during an interview in Boston.
Morningstar Inc., a Chicago mutual-fund information company, tracks 112 Pacific Asia "ex-Japan" funds. But many of these take sales fees off the money invested.
And there are fewer funds, maybe nine, that concentrate on small Asian companies, as does one of the Investec Guinness Flight funds.
His firm also has a Mainland China Fund. Morningstar lists 24 China funds. But many of those invest in Hong Kong or Taiwan as well as mainland China.
Guinness is co-chairman, with Howard Flight, of Investec Guinness Flight. The investment firm manages some $20 billion in 105 funds based in Britain, South Africa, Guernsey in the Channel Islands, Dublin, and Pasadena, Calif.
Guinness and his Hong Kong-based lead manager of three Asian funds, Robert Conlon, insist the Asia-Pacific region, despite the 1997-98 financial crisis, remains the wave of the future.
"We think intelligent investors should be investing in these countries," says Guinness.
"Recessions don't last forever," adds Mr. Conlon. "We are about to enter a sustained period where Asia will be growing faster than the world average." Such countries as Singapore, Malaysia, Indonesia, the Philippines, and Thailand went through financial crises of varying intensity in 1997 and 1998.
The region suffered its worst slump since World War II. But, in Conlon's view, Asia is "making a comeback."
Morningstar analyst William Rocco confirms that the average Asia-Pacific fund outside Japan is up almost 80 percent from a year ago and 37 percent so far this year. But he says investors now have missed that huge run-up in value. "I don't see a big case that Asia stocks are especially cheap."
And he terms the price performance of the Investec Guinness Flight funds as "middling."
Moreover, Mr. Rocco doubts that the average American investor needs to be invested in regional funds at all. Maybe those investors with a strong acceptance of risk and a long investment horizon could put a small portion of their portfolio in an emerging-market fund that invests in several regions.
However, Guinness and Conlon point out that Asian stocks are cheap compared with the Standard & Poor's 500 in the US. Further, Conlon adds, the South Korean economy is growing at a record rate. Thailand's output is up at a 15 percent annual rate this year. Singapore's bouncing back at 25 percent, Hong Kong at more than 10 percent.
Conlon says he's confident these growth numbers will accelerate. The rebound certainly has helped the performance of the mutual funds he manages.
For example, after the value of Guinness Flight Asia Blue Chip Fund sank 37.3 percent in 1997 and another 11.8 percent in 1998, the shares were up 26.6 percent in 1999 through August.
The financial statements of many Asian companies don't match the requirements for American firms. So "high-depth analysis" is needed, says Guinness. Conlon has four other analysts working with him in Hong Kong, three of them Chinese. The company has 70 fund managers worldwide.
The third fund Conlon helps manage is Guinness Flight Mainland China Fund. The fund is too young to get a Morningstar rating. But investment advisers note that putting money into China is hardly risk free.
Investec Guinness Flight altogether offers eight funds to American investors, some brand new and small. They include the Global Government Bond Fund, New Europe Fund, and Internet.com Index Fund.
(c) Copyright 1999. The Christian Science Publishing Society