Asia shows strong performance outside Japan

FUND FOCUS: FAR EAST EQUITY: Best Performer over five years:Irish Life Fidelity Ind China +122%

Worst Performer over five years:BoI Life – Unit funds Far East Equity S3 -1.4%

DESPITE THE turmoil in global equity markets, Far East equities have returned one of the strongest performances of any category over the last five years, according to MoneyMate.

On average, Far East funds have returned 53 per cent in the five-year period to December 3rd. The top performer is an Irish Life fund, Fidelity India China, which grew 122 per cent over the period.

It is managed by Fidelity and incorporates two funds, which invest in Indian and Chinese equities. Each invests in 70 to 80 funds, with the weighting rebalanced every quarter to ensure a 50/50 weighting.

According to Stephen Cass of Irish Life, the main reason for the high return is India and China have outperformed Pacific Basin equities, which are clustered around the financial centres of Hong Kong, Singapore and Sydney. Also, the fund has beaten its own benchmark, he says.

“Over the period, China performed 25 per cent ahead of its benchmark while, despite a tricky few years for India, the Indian fund has performed 55 per cent ahead in the last year.

“Strong demographics, developments in infrastructure and a good consumer story makes it a high-growth area.”

India and China are witnessing a huge movement of consumer power to the middle classes, he says, which differentiates both countries from other markets such as Australia or Hong Kong. As a result, the fund is heavily weighted to consumer-type stocks.

Despite the impressive performance of the fund, Cass stresses it is still a high-risk investment. “It is good to have exposure to what is still a high-growth story but, for the average to high-risk balanced investor, it is advisable to have around 10 to 15 per cent of the portfolio invested in Far East equities.”

He also believes equities in general are a good investment. “Valuation ratios and earnings have held up well, particularly with blue-chip companies.

Although there is a need for the industry to re-educate investors on equities, they are attractive at the moment.”

Bank of Ireland, whose two funds, Far Eastern equity S2 and S3, performed least well during the five-year period, pointed out these funds invest in a combination of both Japanese equities and Pacific Ex-Japan equities.

They suffered from the decline experienced by Japanese equities during the period.