West is no longer best for investors

Fund managers feel Japan and the Asia/Pacific region offer sound growth prospects, says Clifford German
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The Independent Online
NEW investment trust offers this week are targeting Japan and the Asia/Pacific region, responding to hopes that the Japanese government's latest rescue and reflation packages have finally put a floor under share prices on the Japanese stock market, and research conclusions showing that emerging Far Eastern economies have faster growth, less inflation, higher savings and sounder fiscal policies than their rivals in Latin America.

Flemings is considering a placing to enlarge the size of its Japanese Investment Trust, the largest existing Japanese investment trust in the UK with assets of pounds 500m. The offer will include free warrants and should ensure no dilution to the net asset value of existing shares. The cost will be less than the package could be bought for in the market and will be open to all existing shareholders and shareplan holders as well as the general public.

In yen terms, the Japanese stock market has halved in value over the past six years, but it has rebounded more than 25 per cent in the past three months. The Nikkei index of the top 225 Japanese shares is back to around 18,200 from a low of 14.485 early in July, before the Bank of Japan began its campaign to bring down the yen, which had become absurdly overvalued, and to support the banking system.

This week the Japanese government unveiled an $89bn package of reflationary measures and together the intervention should bolster demand for Japanese goods. Almost 50 per cent of the trust's current portfolio is invested in Japanese manufacturing stocks, ready for an anticipated non-inflationary recovery, according to chairman Patrick Gifford.

The case for the emerging Asia/Pacific area is based on sustained growth rather than recovery. The region has achieved average economic growth of 7.2 per cent over the past 18 years, treble the growth of the industrialised economies. More than 90 per cent of the population is under retirement age, development and deregulation has allowed market capitalisations to grow seventeenfold to almost $1.5bn in the past 10 years, and liberalisation has attracted a flood of capital in the past two years.

Share prices are on average about 10 per cent below their peak towards the end of 1993, while corporate earnings have continued to grow strongly. Stock-picking will still be the route to success, however, according to Clive Boothman, current chairman of the Association of Unit Trusts and Investment Funds (Autif) and a director of Schroders Investment Management. Schroders is launching next month an Asia/Pacific Fund aiming to provide capital growth through investment in emerging markets in the region, excluding Japan and Australia.

Schroders takes pride in the fact that it has 54 investment profesionals it can call on for expertise in the region. Launch expenses are limited to 4.5 per cent, the management charge will be 1 per cent plus VAT, one free warrant is added for every five shares bought, and the minimum investment is pounds 2,000.