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The fund is benchmarked against the MSCI Taiwan index, and has a concentrated portfolio of 20 to 30 stocks. Lam stresses her portfolio focuses on high conviction names and corporates with solid fundamentals, relying on stock-picking and market-timing skills to get around the islandÆs historical volatility.
Lam believes there is a new window to enter the market after the recent correction. In particular, she says after foreign hot money û a source of earlier volatility û has pulled out from the market, ôinvestors going into Taiwan right now are the solid, long-term investorsö.
ôThe timing is very important. The market is down 25% from MayÆs peak. Now the valuation is only 12.4 times price-to-earnings, with a possibility of double-digit growth,ö she says.
The market presents a very good buying opportunity, considering the dividend yield for Taiwan stocks is among the highest in Asia at 5%, she adds.
Lam is spreading her bets across three key themes that are likely to take off under the new political leadership in Taiwan: cross-strait liberalisation, infrastructure investments and a pick-up in domestic consumption.
In particular, Lam believes the new governmentÆs i-Taiwan (pronounced as ôLove Taiwanö in Mandarin) initiatives will kick-start a new investment cycle on the island. A NT$3.99 trillion ($131 billion) budget has been committed to boost the islandÆs new cycle.
President Ma Ying Jeou has to boost the islandÆs GDP growth to 6% a year, achieve a per capital income of $20,000 by 2012 and squash unemployment rate to under 3% in his so-called 6-2-2 project. Coupled with rising consumer confidence, Lam believes TaiwanÆs bank saver population, which is currently the highest in Asia, could free up cash to spend and invest again.
TaiwanÆs banking deposit amounts to 217% of its GDP. The figures for Hong Kong and China are 188% and 156%, respectively, while those for Japan and Korea are at 143% and 134%.
Aside from liking consumer and discretionary plays, Lam is overweight on industrial, materials and telecom stocks. She says that given the high prevalence of liquidity, Taiwanese companies are some of the least geared in Asia. Corporates will benefit strongly from asset plays; as they are some of the biggest landlords on the island, they are likely to see a rise on the coming property market boom, she adds.
Meanwhile, weak external consumer sentiment and soaring commodity prices are still ongoing challenges, especially in the coming months the government is still working on removing the price controls imposed previously under former President Chen Shui-bianÆs term. Lam expects inflation to peak by the third quarter and fall by the last quarter of the year.
Because of the bleaker earnings outlook, Lam is holding an underweight position for information technology and energy stocks. She cautions that TaiwanÆs domestic credit crisis is not fully over and she is staying away from small to mid-cap companies for the rest of the year.
The fundÆs initial offering period will continue until July 30. Minimum investment starts from $1,000. Management fee is at 1.5% per annum. The fund also charges a 1% switching fee. It provides daily liquidity and also has a yearly dividend policy.
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