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Asian funds rebound with SARS decline

Global investors are more confident, seek greater opportunities for growth

The retreat of SARS led to a big resurgence in Asia's stock markets in July -- and a strong rebound in mutual funds that invest in the region.

It was a good month all around for mutual fund performance, as global investors grew more confident and funds across nearly every category gained ground, according to monthly data on the industry compiled by

The illness known as severe acute respiratory syndrome and the U.S. war with Iraq dealt heavy blows to the Asian economy in the spring as consumers in hard-hit areas, such as China, Hong Kong and Singapore, stopped shopping, and travellers stayed home.

But in July those worries were lifted and investors searching for the greatest growth prospects pushed mutual funds that invest in Asia, not including Japan, up an average of 9.5 per cent. The group's average loss for the 12 months to July 31 now stands at 5.7 per cent.

Among funds in the Asia ex-Japan group, the $6.1-million Clarington Asia Pacific Fund led the pack with a 14.6-per-cent advance in July. The $33-million HSBC AsiaPacific-1 Fund jumped 12.7 per cent and the $54.7-million TD Asian Growth fund rose 11.9 per cent.

The $3.2-million Fidelity Far East Class Fund increased 10.6 per cent, the Investors Pacific International-C rose 10.3 per cent, and the $16.3-million Clarica Alpine Asian Fund gained 10.1 per cent.

Frank Chiang of Wells Capital Management in San Francisco, said the growth story in Asia began to resume in June as soon as the threat of SARS diminished.

"It's pretty amazing -- after the crisis got under control, it literally turned on a dime," he said of the economic rebound. Mr. Chiang, who is portfolio manager for the Clarington fund, said he loaded up on Asian travel and retail stocks, which plummeted in the spring.

"We took a view that the retail and travel [sectors] were dramatically undersold," he said.

In July those stocks soared and helped push Hong Kong's benchmark Hang Seng index to a 5.8-per-cent gain.

Mr. Chiang continues to favour plays on China's rapacious growth and he has been increasing weightings in that country's energy, metals, minerals and aircraft businesses.

Mr. Chiang has also done some buying in Thailand, where he predicts economic growth will reach 5 to 6 per cent this year. The manager notes that Thailand has paid off about two years ahead of schedule loans from the International Monetary Fund that the country began receiving in 1997.

Thailand's currency is more stable and the country is now free to run without foreign interference, Mr. Chiang said.

"I like the politics, I like the restructuring, I like the direction of the growth."

Funds that invest in other regions of the world also raced ahead. Emerging markets funds saw an average advance of 8.4 per cent, to bring their average one-year gain to 5.9 per cent.

The $39.8-million BMO Emerging Markets fund jumped 11.8 per cent, the $1.7-million Clarica Premier Emerging Markets A fund gained 11.7 per cent, and the $3.9-million StrategicNova Emerging Market fund added 10.7 per cent.

Japanese equity funds advanced an average of 7.5 per cent in July to trim their loss for one year to 12.7 per cent, on average.

The $21.7-million Altamira Japanese Opportunity Fund increased 10.9 per cent, the $22.9-million TD Japanese Growth rose 9.8 per cent, and the $549,000 GGOF Japanese Value added 9.6 per cent.

Precious Metals funds gained ground in July with an average advance of 8.9 per cent. Funds in the group gained a hefty 27.6 per cent, on average, in the 12 months to July 31.

In July, the $124.4-million AGF Precious Metal Fund surged 13.8 per cent, the $127.8-million Sprott Gold and Precious Metals Fund jumped 13.7 per cent, and the $44.9-million CIBC Precious Metals fund rose 12.1 per cent.

In the United States, the tech-laden Nasdaq composite index jumped 5.8 per cent in July. Science and technology funds posted an average gain of 7.2 per cent during the month. The category's gain for one year now stands at 11.8 per cent.

The $2.4-milllion StrategicNova USTech Fund soared 14.3 per cent, the $158.7-million Mackenzie Universal World Science and Technology Capital Class Fund advanced 11.5 per cent, and the $7.5-million ING Global Communications Fund rose 11.3 per cent.

In Canada, the S&P/TSX composite index rose 3.9 per cent in July. The Canadian large-cap equity group mirrored that rise with an average increase of 3.6 per cent.

© 2007 The Globe and Mail. All rights reserved.

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