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No 'retreat' into defensive stocks
Resolution Asset Management's head of Asia Pacific, Andrea McNee, believes shifting towards a value style would be a mistake in current market conditions.
McNee, CIO International Equities, says the Asia Pacific desk, which runs the £100 million Pacific Growth fund and manages a further £500 million in institutional funds, won't 'retreat' into value despite the volatility and uncertainty which has characterised markets in recent months.
McNee, who points out that many countries, particularly India and Indonesia, have been unable to cut interest rates due to high inflation, says the desk is primarily seeking growth companies able to avoid margin squeeze by passing on rising costs to consumers. Key holdings include Woolworths in Australia, Chinese online travel company Ctrip.com, and NHN Corp, a Korean content service operator.
The desk also holds a number of commodity companies and is overweight Australian resources, although it remains underweight technology and manufacturers. On a country basis McNee says the team has profited from holdings in Taiwan, which has just elected a pro-China party, but remains cautious on China, fearing that the authorities will be reluctant to tackle the country's inflation problem ahead of the Beijing Olympics, potentially storing up trouble for 2009.
The team has recently increased Korea to neutral as they believe the domestic environment is showing signs of improvement - and exporters benefiting from won weakness - but wary of the political risk in countries such as Malaysia, where the recent election result caused widespread uncertainty.
She says: "The market is currently in a no-man's land and we think there will be bad news to come from the earnings season, which is already starting to disappoint. But we are not going to retreat into pure defensive stocks as a result - we think there are still plenty of exciting growth companies out there, particularly those able to cope with inflation by passing on the costs to consumers.
"There is no lack of good bottom-up stories and with currencies appreciating we are fairly confident going forward."
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