Phoenix-Aberdeen bets on Asian banks

September 15, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- Newly minted Phoenix-Aberdeen New Asia Fund is making the same bet on banks in emerging Asian markets that Willie Sutton used to make in the United States: that's where the money is.

"In emerging markets, banks expand first because they finance growth," said David Turnbough, vice president of international strategies at Phoenix Duff & Phelps Corp.

Bank earnings in Asian countries, for example, are growing between 15 percent and 25 percent a year, faster than Asian economies, which are chugging along at an average annual growth rate of 12 percent, Turnbough said.

The New Asia fund and another new offering, the Phoenix-Aberdeen Global Small Cap Fund, are products of a six-month-old joint venture between Phoenix and Scottish manager Aberdeen Trust PLC.

The New Asia fund, launched Sept. 4, will invest in companies across Asia including Australia, India and Pakistan. It's modeled after Aberdeen Trust's Far East Emerging Economies Fund, a fund open to British investors and run by Hugh Young.

Young, who's also the lead manager on the New Asia fund, has earned an average annual return for his British investors of 16 percent in dollar terms in the nine years ended July 31, according to Micropal Inc.

He's consistently ranked in the top quartile of Asian emerging markets funds, the mutual fund research firm said.

That fund now has 41 percent of its assets in bank stocks, including Hong Kong Shanghai Bank, Bangkok Bank Co. and Thai Farmers Bank.

That's a strategy the New Asia fund will follow.

The timing for the new fund's launch is promising, said Turnbough, given that turmoil in many Asian countries has sent markets tumbling from their peaks.

On average, they've dropped about 13 percent in the past few months.

The launch also comes as U.S. investors pour money into international funds.

Funds investing outside the United States attracted $21.5 billion in the first seven months of this year, according to the Investment Company Institute.

That's the highest for a seven-month period since at least 1990.

The biggest risk for investors in any Asian emerging markets fund is rising interest rates in the United States.

Interest rates in Thailand and Hong Kong move with U.S. rates because the value of the Thai baht and the Hong Kong dollar are closely tied to that of U.S. currency.

Rates in the Philippines and Singapore also often move with those in the United States.

Rising rates are generally bad news for stock markets because they make corporate borrowing more expensive and bonds a more attractive investment.

Many U.S. investors expect the Federal Reserve to raise rates by a quarter of a percent at the central bank's next meeting on Sept. 24.

Young and other managers at Aberdeen concentrate on stock selection rather than macroeconomic trends, an investment strategy they say protects them somewhat when markets slump.

Young's Asian portfolio, for example, has only fallen about 10 percent in the past few months compared to about 13 percent for the Asian markets in which he invests.

Young, who's based in Singapore, and his team of researchers visit about 700 companies a year, and about half of them have never been called on by money managers, said Turnbough.

"They're ahead of the crowd," he said.

About two-thirds of the companies in the fund are small to mid-sized companies like Giordano International Ltd., a Hong Kong clothing company; Harris Scarfe Holdings Ltd., an Australian retailer; and Manhattan Card Co., a Hong Kong-based credit card company.

Pub Date: 9/15/96

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