Angus Tulloch & Alistair Thompson, Fund Manager, "First State Asia Pacific Leaders Fund" (06.10.2011): "As we believe that earnings expectations are too optimistic, we prefer to position our portfolios defensively. We continue to see the best value in companies with pricing power to maintain profitability, strong sustainable cash flows and growing dividend yields."
Projit Chatterjee, Equity Strategist, "UBS (Lux) Eq Fd - Asia Opportunity (USD) P-acc" (05.10.2011): "We are focused on stock selection. We favour companies with differentiated competitive strengths which can deliver robust returns on capital over the cycle. We look for companies that are attractively valued from a mid-long term perspective. Our continuous endeavour is to find stocks that are mis-priced in the market."
e-fundresearch: "Which are the most important elements in your investment process?"
Angus Tulloch & Alistair Thompson, Fund Manager, "First State Asia Pacific Leaders Fund" (06.10.2011): "When considering individual companies we have strict quality criteria in terms of business franchise, management and financial structure."
Projit Chatterjee, Equity Strategist, "UBS (Lux) Eq Fd - Asia Opportunity (USD) P-acc" (05.10.2011): "At the core of our investment process is the continuous effort to determine intrinsic value. We emphasise long-term fundamental research performed by our internal investment specialists. Bottom-up stock research dominates our investment approach. Research analysts conduct extensive fundamental research visiting not only the companies that they are researching but also competitors, suppliers and non-conventional sources of information (industry executives, consultants, academics). Using this information, analysts build and maintain forward-looking models for each company with standardised inputs to our Global Equity Valuation System (GEVS). Future cash flows are then forecast for each company and discounted to the present. This estimate of future free cash flow is then compared with the current price to ascertain the size of the valuation anomaly. This valuation anomaly is expressed as an expected return (alpha). In addition to quantitative inputs, our analysts also assess the company’s management, strategy and position within its industry.
In making final portfolio decisions, we employ the judgement of our senior investment professionals in order to assess the significance and sustainability of the identified departures from fair value. It is the role of the portfolio manager at the portfolio construction stage to take the analysts´ ideas and insights and construct a portfolio to best meet the client objectives. Risk is integral to the process and all portfolios are monitored to ensure we are not taking uncompensated risk."
e-fundresearch: "Which regions and/or sectors are currently overweight or underweight in Asia ex Japan equity funds? What are the reasons for it?"
Angus Tulloch & Alistair Thompson, Fund Manager, "First State Asia Pacific Leaders Fund" (06.10.2011): "As mentioned, our portfolios have been defensively positioned for some time with overweight positions in the consumer sectors and underweight in the cyclical Energy and Materials sectors which are exposed to the fluctuations of commodity prices. In the First State Asia Pacific Leaders Fund, we have a substantial position in a gold mining company as protection against a loss of confidence in ‘paper currencies’ caused by very loose monetary policy by Western central banks (quantitative easing).
We will continue to look for attractive investment opportunities during periods of market weakness as company valuations become more attractive."
Projit Chatterjee, Equity Strategist, "UBS (Lux) Eq Fd - Asia Opportunity (USD) P-acc" (05.10.2011): "Our sector and country positions are primarily driven by bottom up stock picks.
Overall, we are positive on domestic demand beneficiaries (financials, consumer sectors) which are relatively more resilient given lower earnings risk and structural growth drivers.
Consumption
- Consumption, specifically in Asia, is a major structural theme. Rising penetration from low levels is driven by favourable demographics, rising disposable incomes and low leverage.
Financials
- Unlike European banks which are vulnerable to further stress in their sovereign debt markets, Asian banks are well positioned to ride out the turmoil in Europe. This is especially true for banks in Emerging Asia where there remain ample domestic growth opportunities and domestic interest rates offer reasonable yields. Moreover, Asian banks are in much stronger financial health than counterparts in developed markets. Asian banks´ low loan to deposit ratios, strong asset quality and high capital adequacy ratios underpin their defensive profile. Asian banks are broadly trading below median valuations, due to the pressure from monetary tightening over the past 12-18 months. Our holdings in Asia ex Japan banks continue to offer value and remain amongst the best proxies to domestic growth, which is the preferred investment theme in the portfolio.
On the other hand, we are underweight global cyclical sectors such as industrials, energy and materials as well as countries that could be more vulnerable to a global slowdown such as Korea and Taiwan. "
e-fundreseach: "Where do you see opportunities and where do you see risks?"
Angus Tulloch & Alistair Thompson, Fund Manager, "First State Asia Pacific Leaders Fund" (06.10.2011): "Given concerns about the global economy and optimism about the earnings growth of companies, our bias remains towards more defensive sectors of the market. Cost pressures mean that company pricing power is more important than ever to avoid falling profitability, and strong brands typically enjoy this. We continue to be positive about the prospects for quality Telecoms franchises, as the sector has been out of favour in recent years. Geographically we remain interested in high-quality companies in Taiwan, many of which stand to benefit from an improving relationship with Mainland China, and we continue to take a favourable view on well-run and cash generative Consumer Staples firms."
Projit Chatterjee, Equity Strategist, "UBS (Lux) Eq Fd - Asia Opportunity (USD) P-acc" (05.10.2011): "The fund was repositioned to the current strategy on 16 July 2010. Before the fund name was UBS (Lux) Equity Fund - Malaysia. Thus we can´t comment on 3 and 5 years. Nevertheless, the strategy has outperformed ~1% YTD Aug 2011 (gross of fees) mainly due to positive stock selection, especially in China and Singapore. The risk in terms of tracking error is and has been 4-5%."
e-fundresearch: "Where do you see opportunities and where do you see risks?"
Projit Chatterjee, Equity Strategist, "UBS (Lux) Eq Fd - Asia Opportunity (USD) P-acc" (05.10.2011): "Global financial conditions have deteriorated in recent months due to heightened sovereign debt concerns in the US and Europe and jitters about slowing global growth. The drag from economic uncertainty looks likely to linger. Asia’s growth cycle remains linked to the global growth cycle and due to the trade linkages, Asian economies are vulnerable and will likely follow a slowdown in the US and Europe. On the positive side, a sharper than expected slowdown should bring inflation in Asia under control more quickly. Inflation in much of Asian region was already high but peaking, and now prices of key commodities like oil have fallen. This in turn should justify the end of policy tightening and could improve the outlook for Asian economies and equity markets. Moreover, Asia offers better growth prospects with structural drivers still intact, specifically: demographics, urbanization, productivity and consumption growth. Asia ex Japan economies also benefit from relatively sound balance sheets enjoying generally low debt at government, corporate and household levels.
The near-term outlook for Asian markets remains mixed. Asian equities valuations are trading at well below historical averages, but are still vulnerable to heightened risk aversion due to the European sovereign situation. The silver lining for Asian equities is that many of the policy headwinds we have faced are likely to recede. Weak economic data should lessen short-term inflationary pressures and reduce tightening. Easing inflation and monetary policy, coupled with sounder fundamentals, have the potential to support Asian markets relative to global markets. However, heightened risk aversion could continue to cause capital flows out of asset classes that are perceived to be risky e.g. Equities, including Asian Equities."
All performance data per 26.09.2011
