Fund managers avoid SE Asia

Fund managers avoid SE Asia

HONG KONG (Dow Jones): Southeast Asian markets have long fallen off the radar screens of many fund managers, to the point that even civil uprisings, kidnappings, the impeachment of a president and the firing of a central bank governor in any of these countries don't make a big difference in terms of fund flows.

"We've seen so many things happen over the years that nothing shocks us. To be frank, these are things we don't follow closely anymore," said Peter Hames, a director at Aberdeen Asset Management Asia Ltd. in Singapore.

Most fund managers have been avoiding Indonesia, Malaysia, Thailand and the Philippines for over a year, with these markets being assigned negative weightings in Dow Jones Newswires' monthly fund poll all this time.

In the May poll, sentiment for these four markets sunk further, reversing a generally improving - while still bearish - trend for the previous three months.

In all four markets, political tensions were cited by fund poll participants as the main deterrent. Those fund managers noted, however, that a further drop in weightings for these Southeast Asian markets won't necessarily lead to more fund outflows.

It comes as no surprise therefore that Aberdeen's Hames has "nothing to say" in reaction to the recent kidnapping of foreign tourists from a beach resort in the Philippines and the firing of outspoken Bank of Thailand governor Chatu Mongol Sonakul by Prime Minister Thaksin Shinawatra.

Vincent Duhamel, principal and chief executive at State Street Global Advisors Asia Ltd. likewise brushed aside the latest development in Thailand, and the ongoing efforts to impeach Indonesian President Abdurrahman Wahid.

"Politics and problems that may arise from it don't have too much of an impact in inflows anymore," Duhamel said.

"Portfolio investments in countries like Thailand and Indonesia are so small compared to the big picture, so fund managers don't feel the need to follow these markets anymore," Duhamel added.

JF Asset Management's sentiment for Indonesia has dropped further in May compared to last month. In its reply to Dow Jones Newswires' April fund poll, the Hong Kong-based fund manager said: "Our confidence in the judgment of President Wahid and his ability to control the more unruly elements among his followers has plunged to new depths."

In the May poll, JF Asset Management maintained its view of Wahid, adding it "doesn't expect political problems in Indonesia to bottom anytime soon."

Seng Wun Song, regional economist at G.K. Goh Research Private Ltd., believes that domestic political developments in Southeast Asia are only important to local retail investors. Even then, he said, these local retail investors aren't influential enough to sharply move markets.

"Fund flows to Southeast Asian stock markets have been miniscule compared to overall investments, so the threat of foreigners pulling out and devastating these markets is no longer there," said Song.

But there are a few who haven't dismissed these Southeast Asian markets, and in fact see this as the best time to buy.

Mark Mobius, president of Templeton Emerging Markets Fund Inc., is one among the minority that remains significantly invested in Thailand, Indonesia, and the Philippines.

Mobius believes value-stock picking in emerging markets in Asia will prove profitable within the next two-to-three years, with Thailand likely to post the sharpest gains because the "market has fallen by so much in the past few years."