Thursday February 24, 4:43 pm Eastern Time
worldlyinvestor.com Fund Talk
Internet Seen Rekindling Asian Tech
By Cheryl Peress, Mutual Funds Editor
Matthews Asian Technology Fund wants in on the
early-stage Internet boom in Asia.
The Matthews funds have a long proven track record in Asia. The
managers know the players, understand the governments and see
changes taking place. So why is it launching the Asian Technology Fund now when the idea seems
passe?
``The bedrock reason: tech is far and away the most globally competitive sector in Asia,' says Mark
Headley, president of Matthews International Funds and portfolio manager for the new Asian
Technology fund. He also runs the Pacific Tiger (Nasdaq:MPTFX - news), Korea
(Nasdaq:MKORX - news), Dragon Century China, and Japan (Nasdaq:MJFOX - news) funds.
Another attraction is that the Internet boom is just beginning in Asia. A plethora of new firms have
recently entered the arena, many with stock valuations mimicking their Western brethren.
``Asian technology is every bit as good as anywhere else,' Headley says. ``Companies have been
dealing with the full brunt of competition for years.' But tech is fairly underrated in Asia. ``Asian
investors follow banks and properties,' he says. ``It's an opportunity to address some inefficiencies.'
So how has the fund fared so far? Well, it may be a little early to tell, but you can expect volatility. In
January, the fund lost 10%, but so far this month the fund has gained 14%. But investors seem to be
betting that Matthews will deliver. Since the official opening on Jan. 10, the fund has amassed $10
million in assets. And money keeps pouring in -- roughly 5% more every day.
New Businesses Bloom
``Asia has just woken up,' says Headley. ``The old system broke, but instead of collapsing, Asia has
changed its act.' And along with this wake-up call has been a whole new way of doing business in
Asia.
One result has been the growth of new businesses. ``Entrepreneurship has always been stifled due to
a lack of access to capital,' says Headley. ``Now there is labor mobility, venture backing and
companies get listed quickly. These are radical changes.'
While venture capital has fueled entrepreneurship, IPO activity has forged the growth of new stock
exchanges. ``Nasdaq-style markets are opening up all over Asia.' Headley points to Japan's
soon-to-open ``mother board' exchange, one that will have lower listing requirements than the
current Jasdaq.
The Internet wave in Asia also has other repercussions. Stratospheric market capitalizations are
fueling an M&A boom worthy of the developed world. He cites the recent overly ambitious
announcement by Pacific Century Cyberworks (OTC:PCCLF - news), a company with no profits,
no customers, and as of yet no established core business, of its intent to bid for Cable & Wireless
HKT (NYSE:HKT - news).
Built on Faith
Headley began building the portfolio with companies he and founder Paul Matthews heavily
researched over a great many years. ``Our core holdings are companies we know fairly well,' he
says. ``We have faith in their long-term ability and they are large and liquid.'
The two top holdings are Sony (NYSE:SNE - news) and Samsung (OTC:SSNHY - news). ``Sony
is the premier company in Asia, with the best brands in the world and tremendous intellectual
property,' he says. ``The company is in a true bid to be the largest consumer-electronics company in
the world.'
Samsung is a favorite due to its wide range of products and respected brand name. But more
importantly, it is cheap. ``At 10 times 2000 earnings it is extremely inexpensive,' says Headley.
Another top holding is China Telecom (NYSE:CHL - news), with 17 million customers and a 40%
market share. ``It's the largest listed company in Asia, outside of Japan,' notes Headley. ``And the
market is expected to almost double to 70 million.'
Corporate Demand Bekons
After establishing core positions, Headley branches out. ``We surround (our core holdings) with
companies we are getting to know -- where business models may be changing monthly and major
transitions are going on.'
Aside from the traditional tech and telecom/wireless providers -- the large cap companies that make
up the core holdings -- the fund invests in companies focused on the ``new economy,' namely
systems integration and the Internet.
``There's always been a huge consumer market. Now demand is coming from corporations,' says
Headley with respect to systems integrators. ``There's a wide range of companies providing
services.'
Two of note are Singapore's Datacraft and CSE Systems, a company working with the energy
industry.
On the Internet front, the pickings are even greater. Enewmedia of Hong Kong is one of the fund's
top holdings. The company provides Internet companies with the means to allow customers to
charge purchases online. As the Internet gains widespread acceptance across the region,
Enewmedia's stock has soared.
Another favorite is Cybertek Holdings, a South Korean company that provides Internet security.
Headley says the new fund is exciting and presents a real challenge. ``We're having a lot of fun with
the portfolio. (The new fund) is forcing us to tackle the intricacies of tech in Asia.'
As with all the Matthews funds, minimum initial investment is $2500, $500 for an IRA, and can be
purchased at many of the known fund supermarkets.
Go to www.worldlyinvestor.com to see all of our latest stories.
More Quotes
and News:
OTC BB:PCCLF.OB - news; OTC BB:SSNHY.OB - news; SSNHY - news;
PCCLF - news
Cable & Wireless HKT Limited (NYSE:HKT - news)
China Telecom (Hong Kong) Ltd (NYSE:CHL - news)
Matthews International Funds Japan Fund (Nasdaq:MJFOX - news)
Matthews International Funds Korea Fund (Nasdaq:MKORX - news)
Matthews International Funds Pacific Tiger Fund (Nasdaq:MPTFX - news)
Sony Corp (NYSE:SNE - news)
Related News Categories: funds, retail, telecom
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