Tech-hungry investors should start in Asia, says Fortis
Thursday, March 08, 2001
7:14 pm (GMT+8)
Investors eager to get back into technology stocks should start putting money in Asia where equity markets will recover faster than the United States, Fortis Investment Management said on Thursday.
The Belgian-Dutch financial group told an investors' conference in Hong Kong that it was preparing to beef up its exposure to Taiwan, South Korea and India because of their reliance on the much-maligned tech sector.
"Asian markets tend to trough four to six months before the U.S. does," said Lena Tan, director of research at Fortis Investment Management Asia Ltd. "We believe Asia bottomed out in December and the current downturn is the last leg before a recovery."
She likened the slowdown in the U.S. economy to an inventory correction in the early 1990s when a recovery in Asian stock markets preceded the U.S. by four months.
Tan said the National Association of Purchasing Management (NAPM), the leading indicator of U.S. economic activity, is back at the levels of late 1990 and forecast that it would hit bottom in about two months' time.
Fortis shifted to an overweight stance on technology briefly in December, before moving back to neutral, but the firm intends to build up its exposure to the sector during current dips in stock prices.
TELECOM OUTLOOK IMPROVING
Tan's top picks include Taiwan Semiconductor Manufacturing , the world's largest microchip foundry; Korea's biggest chip maker, Samsung Electronics and electronics display maker, Samsung SDI ; as well as Indian software leader Infosys Technologies .
She also likes the Korean banking sector on merger activity, especially Kookmin Bank , which plans to merge with Housing and Commercial Bank to create the country's biggest bank.
Asian telecommunications stocks are also starting to look attractive again following the rapid derating of the sector globally, said Fortis which plans to move from underweight on Asian telecom plays to neutral in the next few months.
But Tan said she would opt for smaller companies with low valuations such as India's Videsh Sanchar Nigam Ltd and Indonesia's PT Telekomunikasi Indonesia , both of which will be partially privatised.
SK Telecom , Korea's top mobile carrier and state-run Korea Telecom are also attractive, she said.
Tan is particularly wary of telecom blue chips like Hong Kong-listed Hutchison Whampoa , because of the potentially heavy cost of its investment in third-generation mobile phone networks in Europe.
And she is negative on Internet and telecom company Pacific Century CyberWorks , given the uncertainty surrounding when former parent, Cable & Wireless Plc , would sell its remaining PCCW stake.
But Tan does like China Mobile , China's biggest mobile phone operator, which she believes to be at fair value at around HK$37, after shedding 25 percent in the past month.
INDONESIA OFFERS VALUE
Fortis said it is neutral on the Hong Kong and Singapore equity markets because of their limited exposure to the information technology sector, but it likes Hong Kong property.
"The yield on rental property is now falling below the mortgage rate, so I think people will start coming back into the Hong Kong property market to buy," Tan said.
The investment house is underweight on the rest of Asia outside Japan, although Tan likes a number of individual stocks in Indonesia in addition to PT Telekomunikasi Indonesia.
"There are some really good value stocks in Indonesia," Tan told Reuters. "PT Unilever, for example is very cash generative, has return on equity in excess of 30-40 percent and less than half the multiple of (Indian consumer products giant) Hindustan Lever ."
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