Experts look overseas for best returns

PUBLISHED : Sunday, 10 September, 1995, 12:00am
UPDATED : Sunday, 10 September, 1995, 12:00am

EXPERTS say the best returns over the next 12 months will be made by moving money out of Hong Kong.

Asked about the best investments for 1996, financial advisers said the best yields could be made from investments in Taiwan, South Korea, Japan and Europe.

Equities were far and away favoured as the preferred asset class. Advisers said a well picked portfolio could gain up to 50 per cent over the next 15 months.

Jim Mellon, chairman of the Regent Pacific Group, said the best place to put money for returns in 1996 was in East Asia. He favoured Taiwan, South Korea and Japan.

'Taiwan has been very depressed, due to Chinese sabre rattling,' he said. 'But the fundamentals of the economy remain strong.' The market would rebound because people would realise China could not afford a shooting war with Taiwan.

He believed Taiwan stocks would return 30 per cent to 50 per cent over the next year.

Another country likely to give returns was South Korea.

'Korean companies are doing well internationally, and the country is opening up to foreign investment,' he said.

He picked South Korea to offer up to 50 per cent gains.

For the adventurous he said Russia was a hot tip.

'Russia is outstandingly cheap; it is completely misunderstood,' he said.

Danny Truell, executive director of Asian research at SBC Warburg, said investors would also be best to send their money out of the territory, with Europe and Japan offering the best returns for 1996.

Declining interest rates were likely to boost European economies, he said.

Japanese markets were already up 30 per cent from their bottom and should press on for further gains.

Patrick Tuohy, partner with Tresidder, Tuohy & Partners, said he also favoured posting money abroad. For the aggressive investor European warrants could provide windfall gains for 1996, with Europe a major beneficiary of the turnaround in the interest-rate cycle.

Taiwan was also set to rebound and would provide good returns, but it was becoming difficult to buy in, he said.

He said a wild card would be investment in Japan.

He also favoured buying some stocks in the Asean (Association of Southeast Asian Nations) region.

For those determined to keep money in Hong Kong, one option is to go international, by picking up stocks with exposure to China.

Lennon Chan, director of the Tai Fook Group, said the best chance of making money in the local market over 1996 would be found in H shares.

He said the turnaround in China would flow over to many domestic stocks.

'Either in the first or second quarters of next year, China's austerity measures will be relaxed, and this will benefit all companies with mainland exposure,' he said.

H shares can be picked up very cheaply at the moment, he said, though some might still have a way to fall.

He said they would start to gain momentum in the second quarter of next year and would be ripe for harvest at the end of 1996.

He urged buyers to be selective and choose quality stocks from the petrochemicals or heavy metals industries.

Investors could reap reward of about 30 to 40 per cent over this period.

'The Hang Seng Index will go up next year but the H-share index will go up faster,' he said.

At least one adviser said Hong Kong would offer competitive returns for 1996.

Philip Niem, head of Hong Kong and China research for James Capel Asia, said many economies in the region were overheating but the prospects for Hong Kong were good.

The sectors to yield best returns would be properties and banks.

He said: 'Properties could do quite well to buy, as they are rather bombed out. Rents are likely to remain soft, but capital values are likely to pick up.' He said a reasonable portfolio of domestic stocks should yield 15 per cent in 1996.

'This will be a pretty good investment within the Asian context.'