The real risk of a coming correction in Asia

Midas Capital Partners' Nick Greenwood has warned of a potential market setback in the Far East, which he believes could happen over the next few weeks or months.

Greenwood (above), who is group investment director at Miton which merged with Midas Capital Partners in February of last year, said: 'Even though the East has the strongest fundamentals, it will get hit harder than the West. The East is owned by more foreign fund managers who are more comfortable having money at home.

'For example, in Japan and Hong Kong vast amounts of the markets are owned by UK and US fund management groups. When times are tough they feel more comfortable at home.'

In fact, Greenwood has identified what he sees as two hypothetical baths, one in the East and one in the West, which both have liquidity taps turned on. In the West, the plug is open and money is going straight into bank balance sheets. The bath is far from overflowing as cash is not escaping into the markets. Whereas in the Far East, the plug is in and 'water is flooding everywhere', Greenwood said. His conclusion being that asset prices are being driven higher and global markets have become dependent on the actions of the Chinese authorities.

As a result, Greenwood, who manages the CF Miton Select Assets has reduced the fund's general Asian exposure which he notes has become expensive. For example, he and co-manager Martin Gray have sold out of the Aberdeen New Dawn investment trust which was trading near parity.

Back in July, Midas renamed the CF iimia Accelerated fund the Miton Select Assets portfolio and the CF iimia Growth fund was then merged into Select Assets. The fund can invest in closed-ended and open-ended vehicles and seeks to gain exposure to global growth while also taking advantage or pricing opportunities in the closed-ended sector.

Greenwood said the merger and name change formed part of Midas' efforts to streamline its offering. He is also particularly positive about changes to the fund's objective which allow a higher allocation to open-ended funds.

He said: 'The ability to buy open-ended funds means we can protect the Select Assets fund in a downturn, whereas the mechanics were not there in the run-up to the fund merger.'

In fact, Greenwood and Gray are seeking to capitalise on rising asset prices in Asia by gaining access to the real estate market and hold the Macau Property Opportunities and China Real Estate Opportunities trusts.

Greenwood also has exposure to Japan, particularly through the JP Morgan Japanese investment trust which sits in his top five holdings, pointing to significant discounts in the sector which he expects will come in.