A New Look at New Asia
03/25/2005 12:00 am EST
"We are focused on increasing our allocation to foreign companies," says Jim Stack, editor of InvesTech Market Analyst. "In looking abroad, we continue to view Southeast Asia as the best foreign opportunity near-term." Here's his latest featured Asian fund.
"T. Rowe Price New Asia Fund (PRASX) acts as a hedge against a falling dollar and also offers significant growth potential from expansion with the Asian region. T. Rowe Price New Asia was one of the very first mutual fund offerings focusing on Asian investments. The fund opened in 1990, and current manager Frances Dydasco has been at the helm since 1996. Dydasco and her team follow a growth-at-a-reasonable price strategy paying close attention to valuation. The emphasis placed on valuation is critically important in this area, as the potential for a ‘hard landing’ in China is one of the largest risks facing Asian economies in coming years.
"Besides attention to price, diversification has also helped steady the fund’s results. New Asia holds more stocks than its average peer and its concentration in the top ten holdings is one of the lowest in the category. Management is not constrained to stocks of a certain size, but it does focus on well-established companies, which tend to have higher market caps. The fund is also well diversified among countries, with the largest concentrations in India (20%), South Korea (20%), Hong Kong (17%), and Taiwan (13%). The fund has only 8% invested in China, remaining cautious about its accounting standards and the structural integrity of its stock exchanges.
"T. Rowe Price New Asia has a strong track record, performing in the top 35% of the category in each of the past three years. In the past decade, it has landed in the bottom quartile only once. The fund's performance has been buoyed by the fact that this offering sports one of the lowest expense ratios of any non-institutional actively managed fund in the category. Expenses run 1.1% a year versus a category average of 2.1%. However, we caution that the fund can be volatile and like all funds within this group, your allocation should be kept small to minimize the effect of downturns on your overall portfolio."