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To: goldsnow who wrote (22452)	10/31/1998 4:27:00 PM
From: Alex	Read Replies (1) \| Respond to of 116753

INFORMATION PLEASE Patience and discipline can still earn profits ------------------------------------------------------------------------ The Asian haystack INVESTING IN ASIA used to be like shooting fish in a barrel. Today it is more like finding a needle in a haystack. Scobie Ward of Hong Kong-based Lloyd George Management, which manages over $1 billion in client funds, says there are still opportunities for investors who are informed, patient, and disciplined about both taking profits and cutting losses. He spoke to Asiaweek's Alexandra A. Seno: What sectors do you like in Asia now? One of the most important themes in our research has been investing in niche exporters to the U.S. The markets in the U.S. are more firm than the domestic [Asian] markets. Many of the region's exporters are in commodities like steel or chemicals and these companies, while experiencing strong volume growth, are not seeing strong profit growth. Niche exporters, although they cannot be large companies, are among the most promising in today's environment. An area of niche exporters that we find particularly interesting is Indian software companies. We have invested in some of them over the last few years, and more in the last 12 months. Another major holding is Hong Kong's Li & Fung. They source soft goods like apparel internationally. There are also subcontractors in Taiwan who produce computers. They typically sell their goods in U.S. dollars and source their goods in local currencies. Are there other themes worth looking at? Another theme is to invest in companies with strong balance sheets. Economic growth and earnings will be subdued in Asia, so if you're buying an Asian stock you're looking at three-year potential. Companies with strong balance sheets typically are in a position to take advantage of the misfortune of others and to expand. In Hong Kong, one of our major positions is Cheung Kong. While most other companies have been shedding assets to pay their debts, we've seen them making new investments. There is also Dairy Farm, with operations in Australia, Singapore, Hong Kong and Taiwan. This company has over $100 million in cash and its underlying earnings are recovering, so this strikes us as a company whose future is brighter than its past. We avoid the financial services area; banks in particular are clearly vulnerable to a deterioration of quality. As an investor, even if one meets regularly with the company [and] reads annual reports, it's difficult to find out what's really happening to the loan book. Once you have a sector, how do you pick out the winners from the losers? I also try to be independent and look for the "unloved" - often that's where you find the most interesting situation. I went to a conference in Hong Kong some years ago where several hundred companies from Asia came and gave presentations. At this seminar, they had a lunch one day and different companies had tables where investors sat if they wanted to learn more about the company. I had forgotten to sign up for lunch and everything was full. There was one table where no one was sitting and that was the Dairy Farm table. For years and years, Dairy Farm was one of the most disappointing stocks in the Hong Kong market and no one wanted to know anything about it. I sat down because I was hungry and I couldn't eat anywhere else. The fellow there was telling me about the changes in management and the changes in strategy that were taking place. We visited the company subsequently and made a major investment that has done handsomely. And one of the beauties of it was that the stock was trading at a low price because people were disgusted with the previous experience and they didn't want anything to do with it. What do investors have to be careful about in these difficult times? Bad news is usually followed by bad news, like in Malaysia and Russia. In Malaysia, a year ago Prime Minister Mahathir Mohamad called [hedge fund manager George] Soros a moron. There were other bad signs, and it was only after all of this happened [that] Malaysia imposed capital controls. We were in a fortunate position of having [already] sold most of our investments there. So while you want to be patient with good investments, you have to have the discipline to cut your losses. Also, don't be greedy. Bulls make money, bears make money, but pigs never make money. Avoid leverage. You want to be in a position, if [your investment] falls 50%, to be able to double up rather than face a margin call at the wrong time. And you have to monitor an investment regularly. Follow it in the newspapers, read the trade publications. As professional investors, we often visit management or talk to them on the telephone on a monthly basis. One reason it is worth investing in a mutual fund is you don't have to spend the time monitoring an investment yourself. What kind of mutual funds are the best today? With the volatility in individual markets, we have stayed away from launching single country funds because often if a country enters a prolonged downturn, you have no choice but to be invested in that country. Whereas if you have a global or regional fund you can shift the assets to more attractive investment opportunities. So it's generally better for investors to be in a product where the manager has significant flexibility. pathfinder.com