AXA Investment will launch an Asia ex-Japan technology fund next month, punting on a rebound of tech stock values by mid-2000, driven by resurgent demand for computer components.
The fund will launch with a minimum of $30 million of AXA's own money, with the hope of reaching $100 million in six months. Targeted institutional investors in Europe and Asia will pay a management fee of 0.75% with a maximum front-end load of 2%.
Shao-ping Guan, AXA's regional technology and telecom analyst, says the current slump in tech stocks is a prolonged mid-cycle correction caused by investors adjusting their expectation of demand for products in the sector.
"I don't think the semiconductor cycle has ended. This kind of correction can be as long as nine months. The correction in 1995, for example, lasted around 10 months," Guan says.
"But we still believe that roughly by the middle of next year the demand picture will improve. The main drivers of the growth will be GPRS (general packet radio service, or 2.5G), 3G and the proliferation of Internet-related appliances. New digital consumer electronics gadgets like palm pilots will also play a part," he says.
Comparative strengths
Guan lists the dominance of Taiwan in semiconductor manufacturing, Korea in DRAM and India in software development as examples of how Asia ex-Japan can leverage on its comparative strengths in skills and cost to capture the next growth wave in the global technology market.
Nick Thompson, AXA's head of marketing, is confident the fund will prove attractive for institutional investors wanting to gain exposure in Asia outside Japan because of economic concerns in that country. "In any case, Japan is outsourcing a lot of its manufacturing functions to the countries included in our fund and we want to be capturing this trend," he says.
"We understand that some institutional investors, in particular those who have asset allocations in Asia, are finding it very hard to get meaningful exposure to technology in the region. Because the sector is new and dynamic, it's quite difficult to pick the right stocks. There wasn't an Asia ex-Japan fund until now," Thompson adds.
The fund will be 54% weighted on Greater China, the majority of which will be in Taiwan, 27% on Korea, 10% on India and 7% on Singapore.
