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View the article online at http://citywire.co.uk/wealth-manager/article/a735443

Newton’s Pidcock goes on buy spree as cash falls to 20bps

by Danielle Levy on Feb 26, 2014 at 14:47

‘If we have a strong view that a currency is going to weaken we avoid equities in the market or favour exporters. But if we feel a currency is going to weaken temporarily, which is our view with the Australian dollar, we just ride it out,’ he said.

‘Most people were surprised by sterling’s strength during the second half of last year. Our view is it could fall back any time. There could be any number of reasons for sterling strength and we have got to the point where a lot of currencies in Asia or Australia look weak now, so it might well be that they bounce back.

‘Over time we take the view that it will all come out in the wash  and if a currency weakens you can see better earnings and dividend growth.’

Aussie dollar

He remains positive on the Australian dollar, which he views as a strong currency given the country’s low national debt-to-GDP and more normalised interest rate policy.

After a challenging six months for Asia and emerging markets, Pidcock has a positive outlook. He argues that since the shake-out he is seeing a lot more valuation opportunities now the hot money has departed.

‘I feel more optimistic in absolute terms as well. I feel I don’t need to fear underperforming  against Asian markets and for unitholders I think the fund stands to do much better than developed markets from these levels,’ he said.

He anticipates single-digit dividend growth in Asia, in line with earning growth. However, global equities could have a tougher time than some anticipate.

‘I don’t think it will be a stellar year for equities on a global basis. In 2014 I felt US equities could be down because valuations were so stretched at the end of the year. January has been a weak month so it might be that we end the year where we ended in January,’ he said. ‘That might be it for the fall. I feel there is a much better relative outlook for Asia and Asian income funds.’

He remains positive on top holdings casino operator Sands China, which grew its ordinary dividend by 29% year-on-year and announced a special dividend, and Telecom Telstra.

Over the three years to 13 February, Pidcock has posted a 22.8% return compared to a 2.2% Asia ex Japan peer group average. The fund has a historic yield of 5%.

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