Asia-Pacific stock markets have performed reasonably well this year, and that might continue over the near term. But we think the real investment lure in this region is its long-term story.
Asia-Pacific equity markets have roughly performed in line with world markets this year, having gained close to six per cent year to date. Like stock markets closer to home, Asian equities have benefitted from dovish monetary policies in the developed world.
Since many of the countries in the Asia-Pacific region are still developing, they’re dependent on foreign capital. And the loose monetary policies of the U.S. Federal Reserve have encouraged the flow of capital to emerging markets.
Since central banks are likely to tighten policies gradually over time, Asia-Pacific equities may continue to perform decently. But we think the real lure is the region’s longer-term outlook. As emerging markets come to account for a greater portion of the world’s economic growth, investment opportunities in the region should multiply. And don’t forget that the emergence of middle classes throughout the area bodes well for consumption and, therefore, demand.
Our favorite equity fund for investment in the region is Dynamic Far East Value Fund (DYN3579(BE)), (DYN079(FE)), (DYN3479(LL)). Its investment objective is to achieve long-term capital growth primarily through investments in equity securities of businesses in the Far East.
Where the fund is invested
Here’s a breakdown of the main countries the fund is invested in right now: Thailand, 16.8 per cent; Hong Kong, 16.5 per cent; Indonesia, 10.4 per cent; Japan, 10.2 per cent; Pakistan, 8.9 per cent; Taiwan, 8.0 per cent; South Korea, 5.9 per cent; India, 5.0 per cent; China, 4.8 per cent; and Vietnam, 3.7 per cent.
Investment analysis for the fund follows a bottom-up approach, which emphasizes careful company specific analysis. Using a value investment style, the fund invests in companies that represent good value based on their stock price relative to their intrinsic value.
The fund’s portfolio adviser, Chuk Wong, has managed the fund since 1996. He began his investment career in 1989 at Daiwa Securities Canada Ltd. and joined Dynamic in 1996.
Under Mr. Wong, Dynamic Far East Value has been a relatively strong performer. These past 10 years, the fund has delivered a compound annual return of 7.4 per cent, to rank in the top quartile of the Asia-Pacific equity category. It has also performed in the top half of the category in eight of those years.
Volatility, however, has been high. The fund ranks in the top 10 per cent of all Canadian mutual funds in terms of volatility.
Nonetheless, we remain confident in Mr. Wong’s portfolio management and think the fund is suitable for patient, aggressive investors.
Dynamic Far East Value is a long-term buy if you want high growth potential from Asia-Pacific equities and you can tolerate high investment risk.
Canadian Mutual Fund Adviser, MPL Communications Inc.
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