Fund managers expanding portfolios in Asia despite rising inflation

Fund managers expanding portfolios in Asia despite rising inflation
By Lois Calderon | Posted: 05 April 2011 2318 hrs

SINGAPORE: Fund managers are aggressively expanding their portfolios in Asia, given the region's promise of continued fortunes.

The region's growth momentum will likely be sustained, while Asian stocks will rally to their pre-crisis levels, they said. That is despite threats posed by rising inflation and increasing geopolitical tensions in the Middle East.

DWS Investments, the global asset management arm of the Deutsche Bank Group, is bullish about tripling its assets under management in Asia in the next five to seven years from its current eight billion euros.

In Singapore alone, the German-based mutual fund company has one billion euros worth of assets under management, providing a huge potential for expansion.

The bullish outlook comes as DWS expects emerging markets economies to grow by 6.6 per cent this year which while slower than last year's 7.7 per cent, still tops an expected global average growth of 4.3 per cent for 2011.

Rajan Raju, CEO of DWS Asia, said: "Our long-term view around emerging markets is that because of the population growth, because of income generation, the emerging market growth rates are going to continue to be more than the world average. As a result of that, we believe that the asset management industry has a significant role to play in terms of helping individual investors manage their wealth in emerging markets."

That growth is expected to boost corporate earnings in those markets and deliver handsome gains to investors. Already, Asian stocks are fetching valuations cheaper than their counterparts elsewhere, market watchers said.

Wong Sui Jau, General Manager of Fundsupermart.com, said: "The valuations are fairly attractive as well. At this point in time, it's trading at a forward 2011 P/E ratio of about 12.5 times. So, generally, that's not very expensive. We see an upside for emerging market equities. At the same time, because there has been volatility in recent weeks, investors have been cautious but global outlook has improved."

Mr Wong also expects Asian equities to rise above levels hit in 2007 in two to three years' time as Asian firms continue to recover from the recent global financial crisis.

He said: "From a fundamental basis, you should see market indices moving up again and breach levels in 2007."

Against that backdrop, his company fundsupermart.com expects an annual growth of fifty per cent to 70 per cent in terms of assets under administration in the next five years. Fundsupermart.com currently handles S$3.6 billion worth of assets.

Inflation could be a headwind given higher food and fuel costs. Still Asian markets could emerge better than those in the developed world.

Mr Raju said: "We have seen inflation, more political uncertainty out of Middle East and North Africa region, those are the risks we see...but the longer term view is that the fundamentals for emerging markets remain pretty strong."

-CNA/ac

- wong chee tat :)