Money: The Tiger comes in from the cold

It might be time to invest in South-east Asia again, writes Hugo Greenhalgh

A sk anyone in the investment world how to find the best returns and they will say that timing is key. But everybody you ask will also say that it is almost impossible to get the timing right - especially when investing in markets that have recently fallen in value.

The markets of South-east Asia have suffered catastrophic falls in the last two years, derailing the so-called Tiger economies and plunging most of the countries in the region into economic turmoil.

However, since the beginning of the year, many of the unit and investment trusts that invest in the area have been rocketing in value. The numbers speak for themselves. The Thai stock market is up by more than 30 per cent, the Malaysian by 36 per cent and even Japan, which has spent almost 10 years in the financial doldrums, has shot up by 18 per cent since the start of the year.

If you are new to emerging-market investments, you should avoid single- country funds and buy a general fund, which offers greater protection for your money if the bottom falls out of one particular country.

The average emerging-markets unit trust has risen in value by more than 22 per cent since 1 January, which compares favourably with the increase in the average UK income unit trust of 12 per cent.

Changes in the tax-free savings rules mean you can invest in the new ISA savings scheme anywhere in the world you choose - a significant boost for savers. Under the PEP rules, we had to keep at least 50 per cent invested in UK or European Union countries to qualify for the full PEP allowance.

So, is now the time to go for bargains in the Far East?

"Yes, definitely," says Mark Mobius, president of Templeton Emerging Markets Funds and an expert on investing in the emerging markets. "You should definitely invest in these markets and I still say that even though there has been a big recovery already."

However, Dr Mobius is renowned for being a hardy investor, often recommending markets no others will touch. One of his key investment tips for 1999, for example, is to invest in Russia. But for once Dr Mobius is not alone in his enthusiasm for the wilder investment frontiers.

Scott McGlashan, head of the Japanese desk at Perpetual, which has a range of unit trusts that invest in the region, agrees with Dr Mobius. He says: "On a long-term view it is almost certainly good timing to have a portion of your money in Japan and the other Asian countries."

Both Mr McGlashan and Dr Mobius believe the price of stocks and shares in the Far East has fallen so dramatically that for long-term investors, for example those thinking of their pension plans, the only way investments can go is up.

Helen Mackin, an investment strategist at Threadneedle Asset Management, says savers looking at investing a portion of their retirement plans, which will perhaps mature in 20 to 25 years' time, would do well to consider the emerging markets.

While the markets remain volatile in the short term, Ms Mackin believes the future offers some hope for stability.

"On the long-term view these markets look a reasonable place to put your money," she says.

Many UK investors are understandably nervous about investing in the region. In August 1997, a series of events combined to send the East Asian currencies reeling as the money speculators smelled blood and moved in for the kill. The effect on the region's stock markets was disastrous. Within a month, Thailand's stock market had fallen by nearly 30 per cent and Indonesia's had plummeted by 40 per cent.

At the time, many predicted that the so-called Asian flu would spread to the developed markets. As it happened, some other markets around the world, such as Latin America and Eastern Europe, also suffered, but the Western markets weathered the storm well.

Mr McGlashan, at Perpetual, agrees investors are right to be cautious.

"People will be a bit nervous over the next few months," he says, "but I don't think there will be another major correction."

To safeguard against any short-term volatility, Mr McGlashan advises setting up what he calls a "drip-feed savings account" which will invest your savings slowly rather than in one lump sum.

"It would be very sensible to have a savings-type investment in this area rather than rely on one-off hits," he says.

This would suit many monthly regular ISA savers. A portion each month could be siphoned off into riskier - and perhaps ultimately more profitable - funds, while the rest could remain relatively secure invested in UK assets.

Michael Thomas, head of the Japan desk at Scottish investment house Martin Currie, says he has rejigged the firm's Asian funds to be closer to the average holding in the area.

In his opinion, the price of stocks and shares in Europe and the US is so high that one of the best places for a bargain is South-east Asia.

Mr McGlashan agrees, and has started moving Perpetual's investments eastwards.

"Our managed funds have been increasing their exposure to Japan and the rest of Asia over the last couple of months," he says.

It is preparation for what they hope could be a repeat of the remarkable growth rates of the Tiger economies during the 1980s and early 1990s. Dr Mobius believes investors should remember that the sun rises in the east.

"The odds are on for a new bull market," he adds. "There is no doubt about that."

n Contacts: Martin Currie: 0808 100 2125; Perpetual: 01491 416123; Templeton: 0131 228 3932; Threadneedle: 0800 068 3000.

n Hugo Greenhalgh writes for `Investment Adviser'.

Start your day with The Independent, sign up for daily news emails
Life and Style
Fans line up at the AVNs, straining to capture a photo of their favourite star
life Tim Walker asks how much longer it can flesh out an existence
Life and Style
Every minute of every day, Twitter is awash with anger as we seek to let these organisations know precisely what we think of them
techWhen it comes to vitriol, no one on attracts our ire more than big businesses offering bad service
Professor David Nutt wants to change the way gravely ill patients are treated in Britain
people Why does a former Government tsar believe that mind-altering drugs have a place on prescription?
Norway’s ‘The Nordland Line – Minute by Minute, Season by Season’ continues the trend of slow TV
Arts and Entertainment
Jonny Evans has pleaded not guilty to an FA charge for spitting at Papiss Cisse
Life and Style
Kate Moss will make a cameo appearance in David Walliams' The Boy in the Dress
The image released by the Salvation Army, using 'The Dress'
Liverpool defender Kolo Toure
football Defender could make history in the FA Cup, but African Cup of Nations win means he's already content
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Relations Officer

£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Jemma Gent: Project Coordinator

£12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable