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Information Technology and Telecommunications – The Next Wave in China and Southeast AsiaJerry Xiaoxun Lu, Ph.D., Michael Ingraham, Ph.D. and Rahim Kassim-Lakha, members of the portfolio management team for China Region Opportunity Fund, recently returned from China and Southeast Asia. They visited Hong Kong, Taiwan, Singapore, Malaysia, and mainland China. Following is their perspective on investment opportunities in the Asian market. Objectives of our visit Equity Income Fund MegaTrends Fund Recognizing that the region’s economies are improving, we wanted to witness firsthand this renewed growth, especially in the major metropolitan areas of Beijing, Shanghai, and Shenzhen; meet the management of more than 25 key technology and telecommunication companies to evaluate their ability to implement their business plans; and gain the perspective of more than a dozen regional investment analysts from major sell-side firms. We saw numerous exciting developments in technology and telecommunications throughout the region. We’re now even more bullish on our investment strategy for the fund. New investment themes The entire region is changing from isolated city- and nation-states, competing against one another, to a conglomerate of commercially viable, interdependent entities tied together in relationships best described as coopetition. As a new investment theme, coopetition encourages growth in the region and encompasses more countries around the South China Sea while emphasizing the strengths of the whole region, rather than each country separately. Technology and telecom companies vie not only for the competitive edge but also seek joint ventures and alliances to better cooperate in a pan-Asian strategy, which focuses on the entire Asian region as an established foreign market, rather than just focusing on export markets such as the United States. 
We are convinced that the new investment themes—coopetition and pan-Asian strategy—are a result of
renewed economic growth, spurred on by the fact that technological and manufacturing equipment being put
into place now is all state of the art.
Political outlook for China We think that China will continue to reform its economy and move toward a free-market system. After enjoying the fruits of economic reforms for 20 years, people are less willing to go back to the old ways. The current government seems to be dominated by reformists who are keen on perpetuating the new China, not returning to the old ways. The recent success of the World Trade Organization (WTO) negotiations between China and the U.S., despite opposition from Chinese hard-liners, demonstrates this willingness to change. Economic outlook for China We are optimistic about China’s economy for the following reasons:
We have repositioned our fund to potentially benefit from recent developments in technology and telecommunication in the region. As of March 31, 2000, technology and telecommunication comprised 24.89% of the fund’s assets, followed by business services at 10.51% and holding offices at 10.44%. 
We are also evaluating company holdings and are likely to increase holdings in Taiwan and in Malaysia, given their reemergence as viable economies in the region. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. |
