AWSJ: Lim Of SG Asset's Asian New Economy Fund Changes Tacks
May 9, 2001
Dow Jones Newswires
By KAREN RICHARDSON
Staff Reporter
HONG KONG -- Lim Fang Suan isn't happy the technology bubble burst, but the post-boom environment is certainly more his style.
Like many managers of technology funds, Mr. Lim was infected with the excitement of the Internet revolution. But unlike the many out there pointing fingers, dwelling on market post mortems or simply in denial, Mr. Lim is blunt about where he went wrong, and is already changing tack.
"One of the biggest mistakes we made was to be too heavy pure Internet companies," says Mr. Lim, who has managed the Asian New Economy Fund for SG Asset Management since it started in July 2000. "But we have moved away from that, and now our strategy is to limit our exposure to less than 10% of our portfolio."
Mr. Lim has paid heavily for his mistake. His $15 million fund has suffered a 42% loss since it opened for business. According to Lipper Hindsight, however, it has still fared better than the average fund in the international technology sector, which slumped more than 53% over the past year.
One wonders how the Singaporean fund manager, bespectacled and soft-spoken, held his own among the rock-star elite of Internet analysts, "tech gurus" and venture capitalists of launch parties past. Trained as an electrical engineer, Mr. Lim is as comfortable with technical jargon as he is conversing in the hip-hop lingo of the dot-com set. But in hindsight, anyway, he seems to have been uncomfortable with the Internet hype that came to an end last year.
Mr. Lim's fund was once overweight some of the most popular and highly recommended companies of the early Asian technology-stock boom, such as Pacific Century CyberWorks, Pacific Internet, AsiaInfo and Chinadotcom. Those stocks have fallen 82%, 73% and 80% respectively since SG launched the Asian New Economy Fund 10 months ago.
Mr. Lim hasn't dumped all of his Internet companies, but he is now focusing on larger-capitalized firms with growth projections he can add up without the aid of a logarithmic calculator.
"We'll be looking for companies which can source for manufactured goods in China, Korea or Taiwan and sell to the West using the Internet," Mr. Lim says.
Falling nicely into this category is Hong Kong-based trading company Li & Fung, which is widely hailed as one of the best-managed firms to make a successful transition from Old Economy to New. Although the current macroeconomic environment for Asia and its top customer, the U.S., doesn't bode well for many global sourcing firms, Li & Fung is still Mr. Lim's fourth biggest holding, at 3.72% of the portfolio.
Other picks fulfilling Mr. Lim's criteria are several banks, a sector that isn't always included in so-called technology funds.
Mr. Lim has reduced his weightings of National Australia Bank and Singapore's Overseas Union Bank, which were in his top 10 in the fourth quarter of 2000, but he still holds them along with Hong Kong-listed global banking giant, HSBC.
"We have always thought that the financial sector would be the first to adopt new technology, if you consider the use of ATMs (automated teller machines). They're a natural choice," he says.
Most economists predict a gradual recovery for the region on the coattails of a gradual U.S. economic pickup, as opposed to an export-led boom in the style of the post-crisis rebound in late 1998.
Mr. Lim admits the urgency for old economy companies to get wired onto the Internet has toned down for the near term, but is also persuaded that the sell-down of Asian technology stocks has been overdone.
"A lot of negatives have already been discounted in the technology sector, so you're likely to see more upside driven by more liquidity in the market," he says, predicting the U.S. economy will turn around in the latter part of this year with the help of interest-rate cuts.
Mr. Lim's next move within the coming few months will be to increase his exposure to hardware heavyweights Taiwan Semiconductor Manufacturing and its rival United Microelectronics, as well as several equipment manufacturers in Korea and software companies in India.
Taiwan makes up just 6.52% of his fund by country allocation, India just 7.50% and Korea, 14.65%. Hong Kong and China comprise 36.83%, Singapore, 13.56% and Australia, 11.97%.
Mr. Lim is more cautious about timing these days, but is eager to buy back into technology sooner rather than later. He predicts the U.S. economy will turn around by the fourth quarter of this year, led by interest-rate cuts, which will give Asian equities a boost of liquidity and positive sentiment.
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The Top Picks
The top 10 holdings in SG Asset Management's Asian New Economy Fund, as of March 31
Holding % of Fund
China Mobile 5.92
SK Telecom 4.09
Hutchison Whampoa 3.76
Li & Fung 3.72
New World Infrastructure 3.20
Samsung Electronics 3.13
SSI 2.91
Citic Pacific 2.63
News Corporation 2.49
China Unicom 2.46
Source: SG Asset Management
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