Equity bulls poised for comeback in Asia

Equity bulls poised for comeback in Asia

HONG KONG (Reuters): Equity bulls could be back in Asia in 2001, with nearly 92 percent of fund managers polled in a new survey backing them to be the best performing assets in the coming year, but the Philippines and Indonesia remain unloved.

The 12 asset allocators questioned in the latest quarterly survey by Reuters and Hong Kong-based fund management magazine, Benchmark, ranked equities as the top performers for the coming year with 91.7 percent of votes.

Some 42 percent of fund managers backed them as the best bet over three months.

"We believe many quality companies are heavily oversold at current levels," said JF Asset Management, backing an overweight position in the beleaguered technology sector.

Asian stocks have been hammered in 2000.

Excluding China's illiquid B-share markets, investible benchmark indices from Bombay to Tokyo have recorded average losses of 29 percent in the year to date, versus average gains of more than 50 percent in 1999.

Fund managers' favorite, the Morgan Stanley Capital International (MSCI) Far East Free Ex-Japan index, has also seen about 35 percent wiped from its value in local currency terms over the course of this year.

"While further short term volatility is anticipated, we continue to believe in the long term fundamentals of our stock picks," said fund managers at JF, the Asian arm of Chase Manhattan's Chase Fleming Asset Management Group.

Asian bonds -- outperforming regional stocks to return about 9.1 percent to investors so far this year in local currency terms, according to the JP Morgan Emerging Markets Bond Index -- are off the radar screen on a one-year view, but still backed by a quarter of managers over three months.

Cash was picked as an outperformer by 8.3 percent over a year and by 25 percent over three months.

Money managers remain broadly loyal to their technology, media and telecommunications plays, with a third of those polled sticking with a sector that has been pummeled through 2000. The U.S. Nasdaq index, the global high-tech barometer, has lost some 49 percent since its March 10 peak, and is down about 36 percent in the year to date.

Other top sector picks in the short term were financials -- scoring a fifth of all votes for a three month outlook -- and oil stocks, which racked up about 12.5 percent of responses.

But the money managers said oil would lose its luster over the course of the year, with 16.7 percent of those polled pegging it as an underweight sector over a 12-month view.

Consumer stocks, utilities and basic industries were also candidates for underweighting over 12 months, with pharmaceuticals, retail and technology stocks joining them over three months.

Hong Kong was seen as the market performing best over both three months and a year, leaping up from fifth favorite in September's survey to switch spots with former top pick, Taiwan.

Almost 46 percent of fund managers polled put the special administrative region of China at the head of their lists over a one-year timeframe.

Strategists widely expect Hong Kong to be a major beneficiary of China's entry into the World Trade Organization, at least in the short term, as firms use it as a springboard to the mainland.

But not a single fund manager polled saw any immediate hope for the Philippines.

Almost 60 percent of respondents said the Philippines was their least favorite market in the coming year and a third rejected it over the coming quarter.

A third of those questioned gave the thumbs down to Indonesia, with a quarter expecting it to underperform over the next three months.

The risks for markets were diverse, with 16 possible dangers highlighted from high oil prices to tension in the Middle East.

The oil price spike was the chief short term concern, but political risks, weak earnings and inflationary pressures were the biggest uncertainties over 12 months.

Worsening corporate credit profiles highlighted the risks of bond defaults over three and 12 months to eight percent of those surveyed, while a too-early cut in U.S. interest rates was ranked as the biggest near term worry by 11 percent of fund managers.