Many managers said there is already a degree of overvaluation in “H-shares” – domestic Chinese shares listed in Hong Kong. Over 80% said the overvaluation was noticeable to a limited extent and 14% said to a great extent.
China looks set to have a strong influence on the cost of natural resources over the coming year. Almost all managers said the rise of China was likely to continue pushing up prices in dollar terms.
The shape of Asia as seen through the eyes of managers is sh
ifting. Many managers agreed that the idea of a “Greater China” - an integrated investment region consisting of mainland China, Hong Kong and Taiwan - has emerged in investment terms. Only 9% said they saw no evidence of this happening.
Managers were split as to which Asian markets offer the best value at present. South Korea was top with 20 votes, followed by Hong Kong with 17 and India with 10. Indonesia and Thailand rounded out the top five.
Despite these concerns managers said Asia excluding Japan would be the top performing region over the next year on a relative basis. Some 42 per cent of managers ranked it first with Japan in second place. The UK was expected to be the worst performer.
Currency calls
The dollar was by far expected to be the worst performing currency in 2004 but sentiment softened slightly. In December 90 per cent said it would the worst on a relative basis while 69 per cent said so in January. The yen came in a distant second with 12 per cent.
Telecommunications and industrial materials were the preferred sectors over the coming 12 months while managers shunned utilities. Some 44 per cent said it would be the worst performing sector.
Overall managers were slightly more bullish on their expectations for global stockmarket performance. All managers continued to say that the MSCI World Index, as measured in dollars, would be higher in a year’s time. However, the proportion that said they would rise by more than 10% grew, from 32% in December to 41% in January.
More fund groups said they planned to launch new funds in 2004 – an increasing trend over recent months. Share funds were said to be likely to dominate these launches. None said fixed income funds would.
Managers were more willing to make a call on the subject of the outperformance of smaller or larger firms. They widely favoured large companies with 63% saying they would be the top performers this year. Only 13% voted for small companies with the remainder neutral.
Morningstar’s European offices conducted the survey from January 19th-26th. Some 62 fund groups from 12 countries participated. On average they each managed €52 billion (£35 billion) and offered 83 retail funds.
