Fund of the week: Play the rise of Asia's consumer
Oct 23, 2009
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It's been a rollicking good year for Asian markets. "But the rally is too much," says Susie Rippingall, manager of the Scottish Oriental Smaller Companies Investment Trust.
"It's happened very quickly, and my concern is that analysts have got ahead of themselves in upgrading economic forecasts and corporate earnings. I specialise in smaller companies, so I see more of basic manufacturing. And they have very little visibility in orders, as they're geared towards the West. So unless you think European and US consumers are going to go back to their old habits, there is a risk of disappointment."
With this defensive point of view in mind, 6% of the trust's holdings (it trades on a 6.3% discount to net asset value) is now sitting in cash. There is no external debt ('gearing'). Rippingall has started positioning much of the fund towards the rise of the Asian consumer. About half of the trust's financial stocks, for example, are plays on key themes such as hire purchase.
The biggest holding is Home Product Center, "the B&Q of Thailand with about 40 stores". It specialises in modern retail, and sells everything from paint to garden furniture. It trades on a forward p/e of 15.
She also holds Raffles Medical, the hospital and medical centres group, "which is very reasonable value and growing at 10-15% a year". A bottom-up stock picker, Rippingall looks for value when picking stocks, so it's no surprise to see the portfolio now running on a modest median p/e of 12 times.
Over five years, the trust, which has a relatively reasonable expense ratio of 1.6%, has returned 154% against a 130% rise in the MSCI Asia Ex Japan Index.
Tel: 0131-226 3271.
Scottish Oriental Smaller Companies top ten holdings
| Name of holding | % of assets |
|---|
| Home Product Center |
2.7 |
| MobileOne |
2.3 |
| Yuhan Corp |
2.3 |
| JVM Co |
2.1 |
| Raffles Medical |
1.8 |
| Tisco Bank |
1.8 |
| Aboitiz Power |
1.7 |
| Daegu Bank |
1.7 |
| Commercial Bank of Ceylon |
1.6 |
| Security Bank |
1.6 |
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