Fund managers reduce exposure in India-China

By SiliconIndia   |   Friday, 16 February 2007, 06:00 Hrs
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MarketWatch has reported that fund managers are reducing exposure in China and India, where tightening concerns are rising, and investing more assets in Taiwan, Korea, and Thailand, citing Merrill Lynch's latest monthly survey of Pacific Rim fund managers.

Though India was the only Asian market to record net foreign selling last month, Merrill Lynch's economic team expects inflation and tightening in India this year. Last week, the Indian government revised its gross domestic product estimate for fiscal year 2007 to 9.2 percent, but analysts have expressed concerns over sustainability of the growth. This is one of the primary reasons investors are not willing to increase exposure to India.

Similar is the case of China. Twenty-three percent of investors said they expected the Chinese economy to get a little weaker over the next 12 months. At the same time, a net 25 percent of fund managers surveyed said they'd increase exposure to Taiwan, up from 21 percent in January. Taiwan and South Korea both recorded more than $1 billion in foreign net inflows last month.

"Investors have reduced their preferences in the strong markets of Indonesia and Singapore, and put $620 million into Southeast Asia's big laggard - Thailand," Merrill Lynch said. The survey pointed out that only 3 percent of managers said they'd reduce exposure to Thailand, down from 21 percent in January.

Pacific Rim (countries located on the edges of the Pacific Ocean) ex-Japan equities are traditionally being seen as overvalued, and investors are net overweight cash, but not excessively so, the survey found. Investors out their bets back on cyclical sectors at the expense of telecom and consumer market categories. Banks became the month’s most favored sector, as the energy sector, which rebounded from last month's lows in the face of rising oil prices.

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