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What Angus Tulloch learnt from his latest trip to the East
by Matthew Goodburn on Dec 17, 2012 at 11:06
'There has been a lot of de-stocking so we have seen a bounceback over the past three months but China is still trying to switch to a much more consumer focused economy so we don't think this trend is sustainable.'
Aussie dollar to weaken
Elsewhere Tulloch is concerned that the Australian dollar will come under further pressure as weaker Chinese commodity demand and a relatively anaemic domestic economy start to weigh on the currency.
'The Aussie dollar is a very volatile currency. Interest rates have been coming down and the domestic economy is quite weak but it has held up due to a lack of alternative currencies. We expect it to come off quite sharply which is why all our Australian companies have a strong overseas flavour, or in the case of Newcrest Mining, are dollar-denominated.'
Top 10 holding Australian insurer QBE was a notable laggard in the fund in 2012 with Tulloch saying a previous US acquisition had hurt numbers but Tulloch believes that the firm remains a long term winner.
'At some point interest rates will go up and people have to accept that climate change is happening. Despite its mistakes we really like the management team.'
A position in Australian gold miner Newcrest was halved to 3.5% over the past 12 months on short term production concerns but with it now trading at depressed levels Tulloch is tempted to build exposure again, particularly as he sees the company as an insurance policy against the effects of further Japan-led QE in the region.
'Newcrest has gone from $40 to $23 so we might look to add again. It has strong management, good deposits and strong social responsibility.'
The fund has very low exposure to luxury consumer goods, preferring to play consumer demand through telco companies in the region, although Tulloch said that Korean cosmetics firm AmorePacific had been a notable exception, performing strongly due to a strong local market for its goods.
Indian telco Bhati was added recently as Tulloch and Thompson believed the negative sentiment towards India's regulatory restrictions on telcos had become overdone.
With Malaysian-listed telco Axiata having a strong year primarily due to its growth in the Indian and Indonesian market, healthcare has been the other key outperformer. Australian firms Resmed and CSL have led the way, reporting strong growth in Asian markets.
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