Country Weighting
Fund Review*
6/30/2010
Regional equities performed in a range bound market in June, with investors continued to focus on European and US economies. The Fund was flat in June. The underperformance was due to tech companies in Taiwan and Korea, as well as US listed companies and commodity names.
The RMB currency reform was announced in June. Although it will unlikely create an immediate impact towards the real economy, the reform should benefit Chinese equities in the long term through translation gains, as well as creating an encouraging growth catalyst for the equity market. China also announced the removal of export tax rebates in energy intensive sectors. The benefits of upgrading China's manufacturing capacities outweighs negative market sentiment.
The Indian Central bank raised interest rates and the market reacted positively to the move. Domestic consumption remains robust. India also announced measures to deregulate petrol prices, alleviating some pressure from the government subsidy burdens.
Taiwan was flat, amid the Central bank's decision to raise interest rates earlier than expected. During the month, Taiwan reached an ECFA agreement with China and warming cross-strait relations continue to serve as a positive catalyst for both economies in the long term. EU exposure and rising labour costs in China created negative sentiment towards Taiwanese tech sectors.
During the month, the Fund's holdings in China/HK, India and Indonesia were consolidated. Strong performers in semiconductors and online shopping names were reduced as a source of funding. Holdings in the shipping sector were added due to better clarity, with growing evidence that the industry is capable of absorbing tariff increases. The Fund also added a HK retailer after new restructuring to capture greater mainland business, while also increasing the Fund's exposure in HK property following a sector correction and Thai stocks were added selectively.
Concerns in Europe have yet to deter Asia's growth story, as the strengthening domestic markets continues to support the economy, while global leaders work to prevent another financial collapse. Companies' earnings announcement and 2H guidance may be a catalyst for the markets.
* Monthly commentary based on USD Class
^ The Fund has changed its index from MSCI AC Far East ex-Japan to MSCI Daily TR AC Far East ex-Japan Net with effect from 1 January 2007.
Important Information:
Investment involves risk. Past performance is not indicative to future performance. The fund may invest in emerging markets and derivative instruments and thus involve higher risk and volatility. Before investing, please refer to the offering document(s) for details, including the risk factors.
The document is issued by Hamon Investment Group and has not been reviewed by the SFC. It is not a recommendation, an offer or invitation to investment. Consult your financial advisor before making any investment decisions.
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