Funds GreatLink - Great Eastern Life

GREATLINK FAR EAST EX JAPAN EQUITIES FUND report as at 31 December 2005
FUND FACTS
Inception Date 25 March 2002
Offer Price S$ 1.452
Bid Price S$ 1.380
Fund Size
Fund Manager
S$ 65.90 mil
Lion Capital Management
(wef 26 Sep 2005)
Bid-Offer Spread 5%
Fund Management Fee
1.25% p.a.
Valuation Frequency
Daily
Currency of Fund
Singapore Dollar
CPF Approved
CPFIS – OA
Risk Category
Higher Risk / Narrowly Focused
(Regional – Asia)
Mercer Fund Rating as at 31 Dec 2005 ★★★
S&P Fund Stars as at 31 Dec 2005 ★★★
FUND OBJECTIVE & INVESTMENT STRATEGY
The Fund objective is to maximize capital growth through
investing primarily in equities of companies based in China, Hong
Kong, Indonesia, South Korea, Malaysia, Philippines, Singapore,
Taiwan and Thailand, and also in other Asia Pacific regions.
PORTFOLIO WEIGHTINGS
FUND PERFORMANCE SINCE INCEPTION
Price Indexed
160.0
152.5
145.0
13.5
130.0
122.5
115.0
107.5
100.0
92.5
85.0
77.5
10.0
62.5
55.0
Cash
6%
China
16%
ASEAN
20%
Hong Kong
16%
Taiwan
15%
Performance Review (Mar 2002 to Dec 2005)
03 04 05
+53.75
Korea
27%
+45.26
60.0
52.5
45.0
37.5
30.0
22.5
15.0
7.5
0.0
-7.5
-15.0
-22.5
-30.0
-37.5
-45.0
––––– Greatlink Far East ex Japan Equities Fund ––––– Benchmark Index
Benchmark: MSCI AC Far East Ex Japan Index
Source: S&P
For Top 10 Investments refer to page 87.
Percent Change
MARKET REVIEW
For the half year ended 31 December 2005, the fund gained 9.18%
(bid-bid), underperforming the benchmark MSCI Far East ex-Japan index
which rose 13.65%.
Equity markets in Far East ex-Japan did well in 2005, despite being rocked
by several catastrophes including the tsunami, Bali bombing and the Pakistan
earthquake. The benchmark MSCI Far East ex-Japan index chalked up a total
SGD return of 24% for the year. In particular, strong liquidity inflows led to
the significant outperformance in Korea against the regional index. On the
other hand, Taiwan, Malaysia and Thailand continued its underperformance of
the past 2 years, dogged by uncertain policies and depressed investor sentiment.
Despite having to deal with the plunging Rupiah and fuel price hikes, MSCI
Indonesia index rose 18% in SGD terms while China posted a strong 22%
return for the whole year. 2005 was also a record year for equity issuance,
dominated by China, raising more than US$25b with large scale deals coming
from the bank and insurance sectors. At a sector level, Energy, Tech and
Healthcare outperformed, while Telecoms and Utilities lagged.
Over the course of 2005, fears of rising inflation was a prevalent
theme across the region, with rates being adjusted substantially in Indonesia,
Hong Kong, Thailand and Singapore. Most currencies depreciated against
the US dollar, especially the Indonesian Rupiah and the Thai baht. 2005 also
saw widespread strength among commodity prices, supported by significantly
higher prices of energy, precious metals and base metals. This strength is
mainly driven by robust Chinese growth, low inventories, on-going supply
bottlenecks and supply disruptions.
The fund’s performance was dragged down largely by the cautious
positioning taken at the start of the reporting period. The underweight in Korea,
coupled with the significant allocation taken in the defensive markets of Singapore
and Malaysia detracted from performance as MSCI Korea rose 61% while MSCI
Singapore and MSCI Malaysia gained only 16% and 4% respectively.
MARKET OUTLOOK AND STRATEGY
We expect regional equity markets to continue its outperformance
relative to the world in 2006, given the more attractive valuations and
better economic growth. The region is trading at 13.5x PER06, compared
to the 15.8x globally. Rising interest rates and high oil and commodities
prices are the key risks in 2006. From the recent FOMC minutes, the
likelihood of rates peaking appears evident and we believe that this will be
a catalyst for Asian markets to rally.
Liquidity flows into the region will therefore continue to drive the
market. Korea’s Kospi jumped a massive 54% in KRW terms in 2005 on
the back of strong domestic liquidity due to rising popularity of monthly
installment funds and steady money inflow into equity funds. We expect
such strong liquidity flows to continue. This, coupled with the recovery in
the domestic economy and attractive valuations, forms the basis of our
positive view on Korea. We turned neutral on Taiwan recently. We believe
that a major risk of the market remains in technology stocks, but the high
dividend yield will lend support to the market.
In Singapore, we favour domestic-oriented stocks which have an attractive
risk-reward profile with stable cashflow and high dividend yield. The property
sector could return to the limelight from the integrated resorts bidding newsflow
and recovering physical market, though we may likely see REITs getting off to
a tough start in 2006. Although the Malaysian market’s underperformance has
pushed valuations to attractive levels, we believe that consensus 2006 earnings
are still too optimistic and corporates in general lack pricing power. The GLC
restructuring theme would continue to feature in terms of newsflow, but this
is a long-term structural change story. We would underweight Malaysia. In the
smaller markets of Thailand, Indonesia and Philippines, we prefer Thailand due
to the improvement on the macroeconomic front.
PERFORMANCE ON BID-BID BASIS (%)
3mths 6 mths 1 year 3 years 3 years Since Inception Since Inception
(annualised)
(annualised)
Greatlink Far East Ex Japan Equities Fund 2.68 9.18 14.81 89.30 23.72 45.26 10.42
Benchmark Index 4.64 13.65 24.11 99.11 25.82 53.75 12.10
32 NOTE: This factsheet is compiled by Great Eastern Life. The information presented is for informational use only. The performance of the Fund is not guaranteed and the value may increase or
decrease in accordance with the future experience of the Fund. Past returns are not necessarily a guide to future performance.