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Templeton Asian Growth Fund - News
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Templeton Asian Growth comment - Jul 06
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Monday, 28 August 2006
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Fund Manager Comment
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In July, Templeton Asian Growth Fund outperformed its benchmark, returning a net +1.20% (in US dollars) versus +0.19% for the MSCI Asia Free (ex Japan) Index.
Asia recorded a mixed bag of results as concerns over slowing global growth impacted market sentiment. A search for oversold stocks led the fund to increase its investments in Thailand, China "H" and "Red-chip" shares, India and South Korea. With oil prices remaining high, the fund continued to increase its exposure to the oil and gas sector as these companies stand to benefit from greater earnings. Additions to the fund's bank, automobile manufacturer and construction materials and aluminum company holdings were also made as these sectors are expected to benefit from greater regional and domestic demand. By contrast, the fund reduced its exposure to Taiwan's integrated telecommunications sector as stocks reached their sale targets.
China's economy has been growing at its fastest pace in more than ten years, and the government introduced additional tightening measures in July due to renewed concerns of overinvestment. Gross domestic product (GDP) grew an annualized 11.3% in the quarter ending June 30, 2006, mainly due to robust export and investment growth. This brought GDP growth for the first half of 2006 to 10.9%. Investment increased 30.8% during the quarter as both the private and public sectors continued to invest in new projects. China also registered a record trade surplus of US$14.5 billion in June, bringing the total for the first six months of 2006 to US$61.5 billion. Exports expanded 25% year on year, while imports were up 21%. Confident of China's economy, Moody's raised its outlook on the country's long-term foreign currency bonds to positive from stable, while Standard & Poor's upgraded its long-term sovereign credit rating to 'A' from 'A-'.
Lower consumer spending in South Korea led second-quarter gross domestic product to slow to 5.3% year on year from 6.1% in the first quarter. High oil prices further impacted the economy as rising import costs eroded trade surpluses. For the six-month period ending June 30, 2006, trade surpluses totaled US$7.2 billion; lower than the US$12.2 billion recorded a year earlier. Amid growing concerns of slowing economic growth and inflationary pressures, the central bank left interest rates unchanged in July after a 25 basis points increase in June. In politics, Kwon O-Kyu became the new finance minister following the resignation of Han Duck Soo. No policy changes are expected as a result of this cabinet reshuffle.
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Templeton Asian Growth comment - Sep 05
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Friday, 18 November 2005
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Fund Manager Comment
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For the three-month period ending September 30, 2005, the Templeton Asian Growth Fund returned a net 11.47% (in US dollars) outperforming its primary benchmark, the MSCI Asia Free (ex Japan) Index, which returned 9.09%.
While Asia recorded positive returns, the region as a whole under-performed its emerging markets peers due to concerns about high global oil prices and their impact on foreign reserves. Most Asian countries are net-oil importers.
The fund increased its exposure to most countries in the portfolio, during the quarter. The largest investments were made in Thailand, Malaysia, Taiwan and China's "Red-chip" shares. This increased the fund's exposure to diversified banks, wireless telecommunications service providers, and automobile manufacturers. During the quarter, the fund was a net seller in South Korea and the Philippines as some stocks reached their sell targets.
One of the Fund's top 10 holdings, Sinopec, is well positioned to benefit from China's rising oil and gas consumption. Sinopec is the largest integrated energy company in China, responsible for over 20% of China's crude oil production. It is also the largest chemical producer in China. Moreover, the group is the largest refiner in Asia, owning and operating 25 refineries in China. Sinopec has around 30,000 petrol stations to sell its products - making it the largest refinery product marketer and distributor in China.
Despite a minor revaluation of the Yuan, in July, China's exports continued to strengthen reaching a new high this year in August. Exports totaled USD67.8 billion, up 3% month-on-month and 32% year-on-year. Imports rose 23% year-on-year to USD57.8 billion, resulting in a US$10 billion trade surplus for August. While FDI inflows declined 3% year-on-year to USD38 billion, contracted FDI jumped 21% to USD112.7 billion - indicating China's continued attraction to foreign investors. Driven by strong exports and industrial production, China's economy grew 9.5%, year-on- year, in the second quarter. Expanding economic relations regionally, China entered into agreements with Singapore and Thailand as well as held trade talks with Malaysia during September.
Outlook
The Bank of Korea expects the economy to grow 3.8% in 2005, after recording growth of 3.0% in the first half of 2005. The bank left its key interest rate unchanged at 3.25% in September, maintaining its neutral bias. Imports continued to accelerate during the period largely due to high oil prices. August imports jumped 21%, outpacing an 18% increase in exports, resulting in a USD1.6 billion trade surplus. In a bid to improve bilateral trade, South Korea signed a trade agreement with Singapore. Aiming at cooling property prices, the government announced a set of measures including higher taxes for multiple homeowners.
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Templeton Asian Growth comment - Jul 05
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Wednesday, 14 September 2005
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Fund Manager Comment
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Asia performed strongly in July, with the MSCI Asia Free (ex Japan) index up 6.5% over the month. The strong performance, however, was not uniform across the region. South Korea outperformed as Standard & Poor's unexpectedly raised the country's debt ratings, while China benefited from continued strong economic growth. Conversely, political turmoil took a toll on the Philippines, while high oil prices and slowing economic growth hindered Thailand's performance. During the month, the Fund continued to increase its exposure to the region, with its largest investments in Thailand, China "Red-chip" and Shenzhen B" shares and Malaysia. This resulted in an increase in the Fund's holdings in banks, construction materials companies, automobile manufacturers and wireless telecommunications services providers. By contrast, the Fund trimmed its holdings in the Philippines.
One of the Fund's top 10 holdings, Aluminum Corp. of China (Chalco), is China's largest producer of alumina and aluminum products. Its alumina output meets about 70% of the country's needs. Moreover, China is presently the world's second-largest consumer of primary aluminum. Chalco owns mining rights to approximately 150 million tons of probable and proven bauxite reserves. Due to the low alumina-to-silica ratio of China's bauxite reserves, Chalco applies the hybrid Bayer-sintering process, which it has developed and improved upon to enable the efficient processing of the diasporite bauxite generally found in China. The company's main production facilities include four integrated alumina refineries, one primary aluminum smelter and one research center. These are located in Qinghai, Shanxi, Shandong, Zhongzhou, Zhengzhou, Guizhou and Pingguo.
China's economy grew 9.5% in the second quarter, surpassing the 9.4% recorded in the preceding quarter mainly due to strong exports and industrial production. Exports jumped an annualised 31% to US$66.0 billion in June, while imports rose 15% to US$56.3 billion, resulting in a US$9.7 billion trade surplus. This brought the surplus for the first six months of the year to US$39.7 billion, a turnaround from the US$6.8 billion deficit in the same period last year. However, foreign direct investment inflows declined an annualised 3.2% to US$28.6 billion in the first half of the year, as government measures to cool the economy continues to show positive results. In July, China replaced the Yuan's peg to the U.S. dollar with a basket of currencies. Thus far the Yuan has appreciated by 2.1% against the U.S. dollar.
South Korea's GDP growth accelerated in the second quarter to an annualized 3.3% from 2.7% in the first quarter, due to a recovery in consumer spending. The country's trade sector continued to witness a slowdown in exports. June exports increased an annualized 9.6%, while imports rose 14.2%. This resulted in a trade surplus of US$2.6 billion, up from May's US$2.0 billion but less than the US$3.1 billion recorded in June 2004. In an unexpected move, Standard & Poor's raised the country's sovereign-debt ratings by a notch.
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Templeton Asian Growth comment - Jun 05
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Tuesday, 16 August 2005
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Fund Manager Comment
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Continuing investor interest in Asia resulted in the region ending the quarter higher. The MSCI AC Asia ex Japan index returned 4.4% in US dollar terms. During the quarter, the Fund added to its holdings in Thailand, China "H" shares and Malaysia. This resulted in an increase in holdings in the oil & gas, aluminium and banking sectors. The Fund reduced its holdings in Taiwan and China "Red-chip" shares as sell targets were reached. Some switching was also undertaken in South Korea, as the Fund repositioned its holdings.
One of the Fund's top 10 holdings, SK Telecom is the largest wireless telecommunication services provider in South Korea. The company has a market share of about 50%, with KT Freetel and LG Telecom accounting for the balance. Since the end of 1999, the wireless telecommunication market has experienced significant consolidation. SK Telecom and KT Freetel acquired Shinsegi Telecom and Hansol PCS, respectively. SK Telecom has 15 affiliated companies, which are mainly involved in information/communication technology businesses. The company provides services principally through networks using CDMA 1x EVDO, which allows transmission data of up to 2.4Mbps.
China's trade surplus continued to increase, recording a new high in May 2005, as imports grew at a slower-than-expected 15%. Exports remained robust, surging an annualized 30% in May. The result was a trade surplus of US$9.0 billion, nearly double the US$4.6 billion recorded in April. Government efforts to slow down the economy were fairly effective. Inflationary pressures eased and there was slower growth in some areas of the economy. Fixed asset investment grew 28% in May. While it is marginally higher than the 27% recorded in April, it is well below the 50% range seen in early 2004. Politically, relations between China and Japan suffered a setback when Chinese Vice Premier Wu Yi unexpectedly cancelled a meeting with Japanese Prime Minister Junichiro Koizumi and cut short an official visit to Japan.
In South Korea, High oil prices and raw material costs led imports to increase an annualized 18% to US$21.2 billion in June, faster than the 11% growth in exports in May. As a result, the trade surplus narrowed to US$2.0 billion from USD2.9 billion a year earlier, but still higher than the US$1.7 billion recorded in April 2005. The government announced that 2005 GDP growth might be about 4%, lower than the official 5% target as well as the 4.6% growth registered in 2004. The May unemployment rate fell to 3.4%, an improvement from April's 3.6%.
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Templeton Asian Growth comment - Mar 05
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Friday, 29 April 2005
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Fund Manager Comment
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Rising interest rates in the US and high oil prices exerted pressure on Asian markets during March, reversing some of the gains recorded in the first two months of the year. The Fund continued to invest in stocks trading at attractive valuations in the region. This resulted in substantial additions in South Korea, Thailand, China "H" shares and Taiwan. The banking, wireless telecommunications services and integrated oil & gas sectors saw the largest increases. Few sales were undertaken during the quarter with net sales seen in Indonesia. As of end-March, the top three sectors were integrated oil & gas, diversified banks and wireless telecommunications services.
One of the Fund's largest holdings, CJ Corp is expected to benefit from the country's domestic recovery. CJ was established as the first manufacturing company of Samsung Group in 1953 and disaffiliated from the Group in 1993. From its origins as the nation's first sugar refining company, CJ has grown into the country's largest integrated food marker. The company has a dominant market position with strong brand recognition in many of its business areas. The group has 20 affiliates in the country with five of them listed on the KOSDAQ: CJ Home shopping, CJ Food System, CJ Entertainment, CJ Internet and CG CGV. Since 2000, the company has been reshaping its business lines to focus on profitability, paying significant attention to restructuring efforts, which continues to date.
Tension in the greater China region increased during the quarter as China passed the anti-secession law which allows it to use force against Taiwan in the event that the latter demands independence from China. Completing the final step towards a transfer of power, Jiang Zemin resigned as chairman of the state Central Military Commission. President Hu Jintao succeeded Mr. Jiang. Economically, the first couple of months in 2005 point towards rising prices and investment, raising concerns of overheating. Consumer prices bucked a downward trend registering 3.9% y-o-y in February due to the Lunar New Year holidays and higher commodity prices. Fixed asset investment rose 24.5% y-o-y in January-February, faster than the 21.3% increase recorded in December 2004.
Economic indicators are beginning to point towards a recovery in South Korea's consumer confidence and consumption. The February consumer sentiment index reached a 10-month high, while credit card transactions in consumption-related sectors rose 10% y-o-y. The trade balance recorded a US$2.2 billion surplus in February, down from the US$3.1 billion in January mainly due to the Lunar New Year holidays. Exports rose 6.7% y-o-y to US$20.4 billion, while imports increased 4.5%. 2004 GDP grew 4.6% y-o-y, slower than government's 5.0% forecast but higher than the 3.1% recorded in 2003. In politics, Finance Minister Lee Hun Jai resigned following allegations that he benefited financially from real estate sales. Han Duck Soo replaced him.
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Templeton Asian Growth comment - Feb 05
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Wednesday, 23 March 2005
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Fund Manager Comment
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Asian markets saw mixed performances with stronger returns in South Korea and Thailand while Indonesia and Singapore lagged the region. In February, substantial investments were undertaken in South Korea, Thailand, Taiwan and China "H" shares as the Fund continued to invest in value stocks across the region. This resulted in an increase the in the Fund's exposure to the wireless telecommunications services, banks, semiconductors and integrated oil & gas sectors. Little activity was seen on the sell side with only two sales made during the month. These included a packaging company in South Korea and a gas utility in Indonesia as sale targets were achieved.
Expected to benefit from South Korea's domestic recovery, Hyundai Development is the one of the leading residential property developers in Korea. Disaffiliated from the Hyundai Group in 1999, the company ranked among the top 5 in terms of construction capability in Korea in 2004. Moreover, it has a dominant market share in apartment construction under the brand name of 'IPark'. Residential construction represents the largest portion of the company's revenue, followed by civil engineering and commercial buildings. With the management expecting future growth in civil engineering, the company has been aggressively expanding business into that area.
Solidifying China's growing importance globally, the country outpaced the US as the largest consumer of food, industrial commodities and energy (ex-oil) in 2004. According to a World Bank report, China recorded an annual economic gain of US$40 billion as a result of its accession into the WTO. However, the benefits have yet to be felt by the rural residents where average household income fell 0.7%. Consumer prices continued on a downward trend in January, easing pressure on the central bank to increase interest rates. CPI rose 1.9% in January, down from the 2.4% in December, the slowest pace in 14 months. The trade surplus registered a record US$6.5 billion in January as exports continued to thrive. Exports jumped 42.2% y-o-y to US$50.8 billion, while imports rose 24.0% to US$44.3 billion.
In a bid to support the economy, South Korea's central bank left interest rates unchanged at 3.25%. While consumer confidence has been improving, an expected recovery in domestic consumption has yet to fully materialize. Strong global demand for South Korea's vehicles, chips and mobile phones led to a six-year high trade surplus of US$29.4 billion in 2004. Exports increased 31.0% y-o-y to US$253.8 billion, outpacing a 25.5% rise to US$224.5 billion in imports. Despite North Korea's admission to having nuclear weapons, the three key international ratings agencies maintained their credit ratings for South Korea, indicating expectations of a limited impact to the economy.
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