China Fund (CHN)
The China Fund (CHN) is a closed-end fund under the advisement of Asia Direct Capital Management. Traded on the New York Stock Exchange, the fund is geared toward providing investors with exposure to equities of companies based in or out of China. Founded in July 1992, the fund as of this writing had total net assets in excess of $271.30 million. Holdings in the China Fund include companies such as Chaoda Modern Agriculture (industrial), Sohu.com (information technology), and TCL International (electronics). By industry sector, the fund is diversified principally among industrials, information technology, and consumer discretionary.
Over the course of 2003, the China Fund was among the standout, country sector performers. Trading below $15 early in the year, the China Fund was over $45 by the fall. In recent months, however, the China Fund has corrected sharply, dropping below its 20-week exponential moving average (EMA) late in December 2003 and falling below its 50-week exponential moving average in the spring of 2004. Both moving averages are now likely to serve as resistance levels going forward.
What they say: "The symptoms of overheating are mainly a result of overheated investment or, to be specific, the mania in fixed-asset investment, real estate development, and urbanization. They are also related to an extent with the fluctuations of the US dollar's exchange rates with other major international currencies.... Considering the price rise and growing demand for investment, it is too early to judge the effect of the government's adjustment policy only by April statistics. ... We should refrain from rushing to a conclusion that the investment has become runaway, which will prod the government to release tightening policies. Nor should we believe the government's policies will have instant effects." -- Editorial, "No Instant Cure For Overheated Economy," China.org.cn, June 3, 2004.
Thai Fund (TTF)
The Thai Fund (TTF) is a closed-end fund under the advisement of Morgan Stanley Investment Advisors, Inc. Traded on the New York Stock Exchange, the fund is geared toward providing investors with exposure to equities of companies based in or out of Thailand. Beginning in February 1988, the Thai Fund has, as of this writing, $118 million in total net assets. Holdings in the fund include Siam Cement Co., Ltd. (materials), PTT PCL (financials), and Advanced Information Services Corp. (telecommunications). Industry representation includes sector plays in financials, materials, energy, and telecommunication services.
After an aborted move upward in the spring of 2002, the Thai Fund truly got rolling to the upside in 2003. Starting the year near $4 per share, the Thai Fund tripled in price by the fall of 2003, nearly touching $12 per share in January 2004. Since that time, the Thai Fund has corrected sharply, falling repeatedly below its 20-week exponential moving average before finally moving even farther down -- below its 50-week EMA -- by the spring of 2004.
What they say: "Yet all these setbacks have definitely started to tarnish [Prime Minister] Mr. Thaksin's can-do image. He was the country's richest businessman before taking office in 2001, and promised to govern in energetic and efficient ‘CEO style,' in contrast to the bureaucratic flavour of past administrations. His dauntless approach has resulted in a number of controversial but popular policies.... Yet as far as the mess in the south is concerned, he has changed tack frequently, bickered with his subordinates, issued contradictory statements, and most recently, admitted to bewilderment. -- "Thaksin In Trouble?" The Economist, June 3, 2004.
India Fund (IFN)
The India Fund (IFN) is a closed-end fund under the advisement of Advantage Advisors, Inc. Traded on the New York Stock Exchange, the fund is geared toward providing investors with exposure to the equities of companies based in or out of India. In operation since February 1994, the India Fund as of this writing has total net assets of approximately $557 million. The fund is diversified by sector into industries such as petroleum-related; finance and computer software and programming; and includes companies such as Reliance Industries (petroleum), Infosys Technologies (computer software and programming), and State Bank of India (finance).
The India Fund was also a strong performer in 2003. Breaking out above its 20- and 50-week exponential moving averages in the late spring of 2003, the India Fund rocketed from nearly $10 per share to almost $30 a share by the fall. A brief correction took the India Fund back to its 20-week EMA, and the fund temporarily rallied toward a new high. Nevertheless, prices reversed sharply shortly afterward, falling below its 20-week EMA and then even lower, to beneath its 50-week EMA.
What they say: "Conventional wisdom says local interest rates have to fall to align with international figures. The UPA might follow this argument to cut rates further. However, there are several problems with this argument. First, whenever we talk of ‘global' interest rates, we refer to benchmarks such as London's LIBOR of US Treasury yields. These developed-country parameters may not be the right indices to follow. Countries that are capital-rich have lower interest rates, those that need capital have higher rates. By that argument, interest rates in capital-scarce India should be higher than in developed countries." -- Editorial, "Matter of Interest," The Times of India, June 4, 2004.
Malaysia Fund (MF)
The Malaysia Fund (MF) is a closed-end fund under the advisement of Morgan Stanley Investment Management, Inc. With over $55 million in total net assets, the fund is traded on the New York Stock Exchange and is geared toward providing investors with exposure to the equities market of Malaysia. Top sectors represented in the fund include financials, consumer discretionary, and industrials. The fund's largest positions, as of this writing, are in companies such as Malayan Banking, Public Bank (financials) and Telekom Malaysia (telecommunications services).
Like the Thai Fund, the Malaysia Fund also made an abortive rally early in 2002. And also like the Thai Fund, the Malaysia Fund experienced a powerfully bullish 2003, rallying from just above $3.50 in the spring to over $7 by the fall. The correction from those heights has been as severe -- or more so -- as that which befell the China, India, or Thai funds, with the Malaysia Fund dropping below $5 per share by the spring of 2004.
What they say: "China is a magnet for foreign direct investment from around the world. It is also on the radar screens of entrepreneurs who do not want to be left out of the world's most exciting market. And there is no reason why Malaysian businesses should ignore the China market. Malaysia, after all, had a head start in relations with China and there are many similarities between the two countries. Malaysia recognized China as a full market economy and urged businessmen from Malaysia and China to focus on high-value strategic partnerships and ventures -- those that can produce leading-edge knowledge and intellectual property that is globally marketable." -- Hardev Kaur, "The China Imperative," New Straits Times, June 2, 2004.
--eSignal
Originally published in the September 2004 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2004, Technical Analysis, Inc.
Return to September 2004 Contents