FPP Asset Management LLP, manager of the second-best performing Taiwan fund this year, said the country’s equities were no longer “compelling” and has reduced its investments in that market.
The benchmark TAIEX Index has gained 57 percent since last year’s low on Nov. 20, valuing its 702 stocks at an average of 26 times estimated earnings this year, the highest in Asia excluding Japan. Valuations surged as improving ties between Taiwan and China raised prospects for investments from Chinese companies and increased trade.
“Taiwan no longer looks as compelling as it did,” Jonathan Neill, director at London-based FPP Asset Management, said in e-mailed comments late yesterday. “Cross-straits [sic] is mainly hot air and it is getting the locals excited, which is always a worry.”
FPP Asset’s Yellow Tiger Taiwan Fund had an 82 percent return this year as of May 29, compared with the 50 percent gain on the TAIEX index. That made Yellow Tiger the second-best performer among 399 Taiwan-focused funds tracked by Bloomberg.
FPP Asset reduced its holdings of Taiwan stocks to 17 percent from more than 20 percent of its portfolio, Neill said. Taiwan stocks have an 11.6 percent weighting on the MSCI Emerging Markets Index, he said.
The fund increased holdings of South Korean equities as they are more “modestly valued,” he said.
The benchmark KOSPI Index trades at 14.3 times estimated earnings for this eyar.
Taiwan and China will hold their fifth round of cooperation talks next month in Changsha, Hunan Province, a statement on the Chinese Nationalist Party (KMT) Web site said.
The TAIEX has fallen 5.5 percent so far this week, heading for its biggest weekly decline this year.
Taiwan’s stock market has a “unique cross-strait story that other emerging markets don’t have,” Pearlyn Wong, an investment analyst at Bank Julius Baer Singapore Ltd, said in a Bloomberg Television interview.
“That said, in the short term, it will probably consolidate more,” Wong said.
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