Asia rising: growth abounds as manufacturing and high-tech jobs shift to China and India.
"[China and India] have large, billion-plus populations, but they're not punching at their weight," says Eric Sandlund, manager of the Columbia Newport Tiger Fund, which invests in Asian funds. "Their gross domestic products are much smaller than you'd expect, for economies of their size. Until the last decade or two, they have not pursued market-oriented policies."
Such policies have created megagrowth that makes it tempting to invest in Indian or Chinese companies. But there is risk too. India has faced political turmoil as recently as May, and China faces uncertainty as to how much free enterprise the Communist government will permit. Mutual funds offer several possibilities:
A few mutual funds invest only in the stocks of India or China. "For China, you have a spectrum of investment opportunities," says Bill Rocco, senior analyst at mutual fund research company Morningstar. Most funds have more exposure to China through Hong Kong companies than through mainland China companies."
Such funds can have very good years ... and very bad ones. For example, the Eaton Vance Greater India (ETGIX) fund had three years of losses, followed by a 114% return in calendar year 2003. Similarly, Alliance Bernstein Greater China (GCHAX) posted an 81% return last year, after negative results in 2000, 2001, and 2002.
Morningstar has a "Pacific/Asia ex-Japan" category of Far East funds that exclude Japanese companies. The average fund in this group had between 30% and 35% of its assets in Hong Kong/China and another 0% to 10% in India. Regional funds tend to be significantly less volatile than single-country funds.
"If you want Asian expertise," says Rocco, "Matthews is the place to go," referring to a family of funds specializing in Asian stocks. Mark Headley, president of San Francisco-based Matthews International Capital Management, who co-manages several of those funds, says that Matthews Pacific Tiger (MAPTX) is the best choice in his shop for investors who want both Chinese and Indian stocks. "This fund has over 40% [of its holdings] in those two markets, with an enormous exposure to China/Hong Kong."
DIVERSIFIED EMERGING MARKETS FUNDS
These funds invest in areas such as Latin America, South Africa, and emerging Europe, but have less exposure to China and India. Nevertheless, some entries cover the Asian countries: Oppenheimer Developing Markets (ODMAX), which Rocco calls "an excellent source of international spice," recently held 22% of its assets in India. Bocco also likes T. Rowe Price Emerging Markets (PRMSX) and American Funds New World (NEWFX). "Compared with single-country and regional funds," he says, "most investors would be better off investing in a broad emerging-markets fund, which usually have some China/Hong Kong holdings." For more overseas investing advice, see "Investing Outside the U.S.," this issue.
OP 5 CHINA & TOP 5 INDIA FUNDS (RANKED BY PORTFOLIO WEIGHTING) % of Portfolio in 1-Year Ann. Fund Name: Ticker China/India Total Return * China Matthews China: MCHFX 73.26 36.95% Guinness Atkinson Chin&HK: ICHKX 65.19 32.77 Columbia Newport Grt Ch A: NGCAX 62.68 33.77 US Global Inv China Reg: USCOX 57.87 40.33 Eaton Vance Grtr China A: EVCGX 48.29 28.62 India Eaton Vance Grtr India A: ETGIX 100.00 47.87 Oppenheimer Develop MktA: ODMAX 19.37 40.30 Heritage Intl Equity A: HEIAX 18.38 23.70 Janus Adviser Intl Gr I: JIGRX 13.41 25.06 Janus Overseas: JAOSX 12.52 25.80 Minimum 3-Year Ann. Initial Fund Name: Ticker Total Return * Investment China Matthews China: MCHFX 6.32% $2,500 Guinness Atkinson Chin&HK: ICHKX 5.06 2,500 Columbia Newport Grt Ch A: NGCAX 5.29 1,000 US Global Inv China Reg: USCOX 5.47 5,000 Eaton Vance Grtr China A: EVCGX 3.61 1,000 India Eaton Vance Grtr India A: ETGIX 17.16 1,000 Oppenheimer Develop MktA: ODMAX 15.06 2,500 Heritage Intl Equity A: HEIAX -0.54 1,000 Janus Adviser Intl Gr I: JIGRX -3.10 2,500 Janus Overseas: JAOSX 2.01 2,500 Toll-Free Fund Name: Ticker Number China Matthews China: MCHFX 800-892-0382 Guinness Atkinson Chin&HK: ICHKX 800-915-6566 Columbia Newport Grt Ch A: NGCAX 800-322-2847 US Global Inv China Reg: USCOX 800-873-8637 Eaton Vance Grtr China A: EVCGX 800-225-6265 India Eaton Vance Grtr India A: ETGIX 800-225-6265 Oppenheimer Develop MktA: ODMAX 800-525-7048 Heritage Intl Equity A: HEIAX 800-421-4184 Janus Adviser Intl Gr I: JIGRX 800-525-0020 Janus Overseas: JAOSX 800-525-8983 * RETURNS THROUGH JUNE 25, 2004. SOURCE: MORNINGSTAR INC. MORNINGSTAR MAKES EVERY EFFORT TO ENSURE THE ACCURACY OF THIS DATA BUT CANNOT GUARANTEE IT.
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|Title Annotation:||Mutual Fund Focus|
|Author:||Korn, Donald Jay|
|Date:||Oct 1, 2004|
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