Performance Review 2005
Allan Liu: "In 2005 strong security selection in financials, information technology and utilities sectors helped the fund return 49.4% over the year, against the benchmark growth of 35.4%. Indonesian utilities company Perushaan Gas Negara was the single largest contributor, in addition to the strong performance by South Korean automobile firm Hyundai Motor. In fact South Korea was the biggest contributor on a country basis, where strong security selection proved rewarding. Besides Hyundai, the overweight in Shinhan Financials and Hyundai Heavy Industries bolstered performance. In Taiwan, many technology names enhanced the fund’s relative returns. Conversely, the underweight in China Mobile and an ex-benchmark exposure to Taiwan’s Far Eastone Telecom hurt performance."
Performance Review 2006
Allan Liu: "The fund outperformed its benchmark in 2006 on the back of rewarding stock selection in industrials, financials and utilities sectors. The fund returned 20.15% compared with the benchmark’s 15.3%. Within industrials, the overweight in ship builder COSCO Corporation of Singapore was among the largest contributors on the strength of growing international trade. In addition to positive section of securities in China and Hong Kong, as well as off benchmark exposure to Australia were the key contributors to the fund’s outperformance. Meanwhile, positions in certain Taiwanese hardware manufacturers detracted."
Performance Review 2007
Allan Liu: "The fund strongly outperformed its benchmark in 2007, returning 54.3% against the benchmark returns of 33.9%. Overweight exposure to the industrials sector, particularly shipbuilders such as COSCO Corporation and Korean engineering and construction companies such as Samsung Engineering performed strongly. Stock exchange operators and securities broking firms were also the key contributors to the fund’s outperformance. Conversely, stock selection in the Indonesian utilities sector detracted. In particular, the overweight in Perusahaan Gas and underweight in Indonesian coal miner Bumi Resources proved unrewarding."
Performance Review 2008
Allan Liu: "The fund underperformed its benchmark against the backdrop of highly volatile market conditions. Stock selection within industrials stocks proved unfavourable. A sharp decline in international trade resulted in dry bulk carriers such as COSCO Corporation and Yangzijiang Shipbuilding inhibiting performance. A position in Focus Media Holdings was the biggest detractor on account of concerns about a slowdown in advertising revenues. Weakened trade activity hurt holdings in Singapore Exchange and Korea Investment Holdings. In the contrary, Key overweight positions in the telecommunications sector, such as Taiwan’s Chunghwa Telecom and Malaysia’s Digi.com proved rewarding."
Performance Review 2009
Allan Liu: "Asia Pacific ex-Japan equities surged during 2009, in a reversal of trends in 2008, as massive fiscal spending, mainly in China, buoyed confidence. The fund strongly outperformed its benchmark over the year mainly driven by stock selection within the consumer discretionary and information technology sectors. Companies such as South Korean automobile component manufacturer Hyundai Mobis and automobiles, handset battery manufacturer BYD Company boosted performance. Share prices surged on the back of an increase in demand for cars in the US and China. The fund also benefited from its holdings in certain Chinese internet services providers such as Tencent and CTrip.com amid growth demand and ad revenues. However, stock selection in Korea, particularly certain insurance and consumer staples stocks detracted."
Performance Review 2010 - Year-to-Date
Allan Liu: "So far this year, the fund has underperformed its benchmark mainly due to the underperformance of certain high conviction holdings in Chinese technology and consumer discretionary sectors, which had supported the fund´s performance in 2009. These include BYD Company and internet services providers such as Tencent Holdings and Sina Corp. I continue to hold these stocks for their strong long term growth prospects. Not holding telecommunications names, most notably China Mobile, eroded value as investors sought defensively positioned names. Conversely, select overweight positions such as Chinese internet search engine Baidu, Indonesian tobacco firm Gudang Garam and Korea’s KIA Motors proved rewarding."
Performance since 2005
Allan Liu: "Over the full period since 2005, the fund has outperformed its benchmark. The strategy to focus on growth stocks yielded healthy returns during 2005, 2006 and 2007. Thereafter, equity markets fell sharply towards the end of 2007 and early 2008 reducing investors’ risk appetite. During the middle of 2008, Allan moved towards more stable cash-generating companies, particularly a number of telecom services and utilities firms, although his long term investment strategy remained intact. These changes aided the fund’s relative performance during the second half of 2008. In 2009, I was timely in positioning the fund to take advantage of the recovery in the region’s economic activity. Subsequently, the fund was able to recover the losses of 2008."
Investment Process and Strategy – How does the Fund Manager Invest?
Allan Liu: "I am a growth-orientated investor with a bottom-up approach to stock selection. He looks for attractively valued companies that reflect strong growth prospects, in other words with above average earnings growth potential relative to both the sector and the market, and where the management has a good track record of creating shareholder value. I will focus on in-depth fundamental analysis which includes assessing the company’s cash flow potential as well as directly visiting the companies, suppliers and competitors. I favour medium and large-cap stocks as they tend to offer longer track records of corporate profit growth, management capability and trustworthiness. I am benchmark aware but not constrained by it."
Investment Outlook
Allan Liu: "The Far East ex Japan region has better potential for sustainable economic growth relative to the rest of the world. The region has not yet felt any significant impact from fiscal austerity and strains on Eurozone banking systems. The region with generally healthy financial systems and solid fundamentals remains attractive. Domestic demand remains robust, supported by low debt and high savings, all of which are likely to support a multi-year growth cycle. Headwinds do remain as the region is not completely immune from a potential Euro area/global downturn. Overall, I remain cautiously optimistic given the strong market rise last year and stimulus withdrawal."
