Philip Hunter, Manager of the Old Mutual Asian Select Fund
Asian equities fell 3.5% in January but this is a temporary blip

• They outperformed global equities in two years to September 2010
• At this point strong numbers from the US caused global investors to rotate out of Asian and
• emerging markets towards the West
• Asia has also been hit by rising oil prices
• Short-term uncertainty should not take away from long-term robust case for Asia

Rising inflation and interest rates are a cause for concern

• Important to avoid companies that may see their margins squeezed
• Invest in companies that can pass higher input costs on to customers
• Consumer stocks will find it hard to do this but the portfolio is already underweight here

As Western economies start to improve, Asian exporters look more attractive

• Need to be selective on individual stocks
• One stock he favours is China Merchants which operates the largest container ports in the region
• This benefits not just from exports to the West but from global trade as a whole

A favoured holding is Kasikorn Bank, based in Thailand

• Hunter is positive on the national economy
• In the last decade, corporate Thailand has been slow to invest in new capacity
• This has been changing in recent months as the political backdrop becomes more stable
• Corporate Thailand is beginning to borrow to finance capital investment
• This creates a strong net income growth for banks such as Kasikorn
• Stock remains good value today

Incitec Pivot, another favoured holding

• Two core businesses: explosives for the mining industry and fertiliser for agriculture
• Both areas likely to grow due to the underlying strength of commodity prices
• Farmers are using more fertilizer to increase yield
• Miners are increasing production as demand for commodities rises

Core themes in portfolio for Q2 2011

• Pro-cyclical bias in the fund, Hunter expects economy to deliver strong growth
• Overweight areas that benefit from this, eg industrials, IT, materials and energy
• Underweight defensives with less leverage into economic growth, eg telecoms and consumer staples
   

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