As the debt crisis in Greece threatens to tear Europe apart, there is considerable merit in UK investors looking further afield to spread their risks. The Far East looks to be a haven of tranquillity amid world chaos.
Investing in Asia is certainly not without its risks. The Far East went through its own banking crisis in the 1990s and there are issues of corporate governance in many countries. The way that companies are run and the lack of transparency in wheeling and dealing can leave a lot to be desired, even by tarnished Western standards.
However, the Pacific and South Asia have come out of the recent sub-prime crisis relatively scot free and there is no doubt that economic growth will massively outstrip the Atlantic nations in the next few years. The Asian banking system is generally in good shape.
Figures produced this week by Henderson TR Pacific Trust show stock markets in India and Indonesia doubling in 2009 with China up by nearly two thirds, Singapore and Thailand by three quarters and Taiwan by four fifths. These gains are substantial though less dramatic in sterling terms--it is always worth remembering when you invest abroad that foreign currency movements have to be taken into account as well as share price movements.
So much for last year. What about 2010? Andrew Beal, who manages the portfolio, is upbeat on China, so much so that he is applying for permission to invest directly on the Shanghai stock exchange. Chinese companies already dominate his portfolio but so far, like most westerners, he has bought into those that are listed on the Hong Kong Exchange, which restricts the choice.
A permit to invest direct can take 18 months to come through and Beal tells me that it will not be possible to dip in and out as you might on a western stock market. The Chinese authorities are looking for a long term commitment. If you invest and cash in, Beal says, you go to the back of the queue with a black mark against you. Nonetheless, it is clear that he thinks a long term commitment is worthwhile and he is satisfied that the Chinese authorities are determined to see that listed companies behave properly.
One factor influencing this decision is the rise in living standards in China, where there is a realisation that exporting cheap and cheerful stuff to America is not the be all and the end all.
Beal says: "There is a need to grow the domestic markets. This is a trend that the Chinese government is keen to encourage. It is not just about volume any more. There is a demand for more branded goods. Chinese consumers are trading up in terms of quality."
For some, he says, the first TV is a flat screen as large as those in the West, on average 36 inches.
Taiwan is also in favour, helped by the pragmatic attitude that the mainland communist leaders take towards it.
India is more problematic. The Henderson fund did not originally include the subcontinent in its mandate and had to seek shareholder permission to amend this omission. While Beal feels that opportunities have thus been missed in the past, he is still circumspect.
Despite steering clear of Pakistan and Sri Lanka at this stage, he has added to his holdings in India, although he cautions: "Corporate governance and transparency are more patchy outside the top companies."
Regular readers of this column will know that I usually exhort private investors to take responsibility for their own decisions. However, when it comes to foreign investments there is much to be said for going through funds whose managers visit the region three or four times a year and have access to overseas executives visiting these shores.
Crystal Ball
Crystal Palace supporters should look away now. Lloyds Bank is celebrating a better first quarter than expected but it has a little problem in south London. It has become the reluctant owner of the Crystal Palace football ground at Selhurst Park, thanks to the club going into administration this season.
Lloyds has a choice. It can sell the ground to a consortium of fans trying to rescue the club or it can sell the land to property developers for twice as much and leave the club homeless and possibly unable to continue next season.
It is a source of great amazement to me how banks have continued to prop up football clubs throughout the various divisions long after all other local lending has been sacrificed on the altar of regionalisation. Local businesses must be wondering what on earth is the appeal of all the bankrupt clubs that survive after spending money that they do not have.
It will be interesting to see whether harsh economics prevail or whether Lloyds has a closet Palace supporter erring on the side of sentiment among its decision takers. Given that we, the taxpayers, own most of Lloyds it is an important decision.
