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Asian Funds Bouncing Back

- Alan Lavine and Gail Liberman

Asian funds, excluding Japan, are on a roll.

The average mutual fund that invests in Asia has grown at an 8.3 percent annual rate over the past five years. By contrast, U.S. stocks, as measured by the S&P 500, dropped -1 percent annually over the same period.Remember when Asian stocks got hammered in the mid-1990s? Well, they've bounced back. The reasons: Countries have gotten their debts under control and exports are booming. It seems like nothing is made in the USA any more.

Mark Headley, manager of the Matthews Pacific Tiger Fund, one of the best-rated funds in its class over the past five years, according to Lipper Inc., New York, is cautiously optimistic about the future. He warns that single country and sector funds are much riskier than well-diversified stock funds. Bad news about a country, economic problems or currency problems could send markets tumbling.

With that in mind, he says that Asian markets, excluding Japan, have performed well this summer. He recently visited Hong Kong and Singapore and favors these markets. He also invested a small percentage of his fund's assets in India for the first time. He says that country's stock market regulation is improving and the market is more accessible. He also likes India's growing software industry. In both China and India, hat-manufacturing sectors are growing.

Exports are strong.

"Overall the markets continue to trade with a wary eye on the global economy and news about the SARS virus," Headley says. "Earnings announcements have been in line with expectations. Earnings growth must underpin future stock price appreciation."

Headley's fund has 17 percent invested in China, 24 percent in Hong Kong, 14 percent in Singapore, 24 percent in South Korea, 9 percent in Thailand, 6 percent in Taiwan, 5 percent in Indonesia and the rest in cash as well as other countries.

The fund's largest holdings include Hon Hai Precision Industry, Taiwan, a global leader in manufacturing solutions; DBS Group, Singapore, a bank; Venture Manufacturing, Singapore, which provides manufacturing services to electronic companies; Swire Pacific, Hong Kong, a leading property developer; and Advanced Information Services, Thailand, a company that operates mobile telephones.


Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books).

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