David Leary, First State's London-based head of global equities and manager of the First State Global 100 Fund, takes a global approach when picking investments. He and the team of internal analysts at First State Investments, part of Australia's Commonwealth Bank Group, analyse industry sectors such as technology, oil or consumer goods on a worldwide basis. 'We tend to look at an industry from a global perspective and try to pick a handful of decent stock ideas from the particular industry, wherever they happen to be in the world. 'That works particularly well in an area like technology, where the value chain is clearly global. On the face of it, it might not work so well in areas where there is a big local influence on business, such as consumer goods. But we have found that if you understand how a retail business works globally, you can look at a local operator and decide whether they have the right stuff to succeed in their own market. It is a global/local approach.' First State has about US$56.5 billion in funds under management, much of which was raised in the Australian market. Mr Leary said First State did not attempt to position its portfolios ahead of an expected macro-economic event. 'We don't believe we have the ability to do that. What we believe we have the ability to do is understand what drives an industry and particular companies within that industry and how that relates to their performance in the stock market. In a nutshell, that is how we look at the world. Our country weightings are very much driven by where we are seeing interesting stock ideas.' A main team of First State analysts in London and a smaller resources team in Australia scour the world for stock-buying opportunities. Recently, word from the analysts that there could be some good value in stocks in Thailand and Malaysia led Mr Leary on an Asian trip, where he met key figures in Thai banking, finance and property development to get an overview of the business environment. 'On those three fronts it seems to be positive news. If there are any concerns it is that things are heating up a bit too quickly.' The possibility of war with Iraq is one of the biggest uncertainties facing global investors. As a bottom-up investor, Mr Leary does not ignore global political developments, but nor does he try to prepare his holdings for any particular outcome. The focus, as always, needs to be on individual stock-buying opportunities in the present environment. One promising sector is oil, with stocks of the oil majors sold down on uncertainty despite the galloping price of their underlying product, which recently breached US$35 per barrel. 'Conventional wisdom has been thrown out the window here. People have sold their oil stocks ahead of time [a possible war with Iraq] because that was the right thing to have done last time just after the Gulf War started in the early 1990s. 'So you find yourself asking: 'Are there some opportunities here?' Our energy analyst thinks the oil majors are now at ridiculously low valuations. We have been topping up our positions in the global fund in companies like Elf Oil, Total and Royal Dutch. We see a period where the oil price should remain in the mid-US$20s level. At any oil price in that range, these guys are going to do extremely well.' Mr Leary also likes the energy services sector, although this is not because of the high oil price - which is delaying the expected jump in oil companies' investments in exploration. They will wait for the price to settle down before committing to their capital expenditure programmes. 'Over the past few years we have seen an under-investment in exploration, but ExxonMobil and BP are going to commit significant funds over the next few years, cranking up some of their exploration and production.' Mr Leary has invested his fund in energy service companies such as United States-listed Noble Drilling and Transocean, which will benefit from the oil major's capital investment programmes. As an example of the volatility in world markets, during the equity market rally late last year Mr Leary's fund bought a holding in Nokia at 13 euros (about HK$111.22), based on First State's analysis. Within 1.5 months, the stock price reached 20 euros. Mr Leary said: 'In an ideal world you might buy Nokia at 13 euros and you would expect to see it at 20 in two years' time, but the reality of markets these days is it can happen in 1.5 months. There is no question it is a challenging environment.' As at the end of January, the Hong Kong-authorised First State Global 100 Fund had returned -17 per cent over one year and -38.2 per cent over two years. Profile: 1985: Bachelor of Arts (Hons) degree in economics and social studies from the University of Manchester 1986: Graduate trainee at Lombard Odier (European equity and technology teams) 1988: Joined with colleagues from Lonbard Odier to start Law, Dempsey and Company, with responsibility for British and European equities. 1998: Appointed head of equities following the (1993) AIG acquisition of Law, Dempsey. March 1999: Joined First State Investments as deputy head of global equities. MEET09GET Graphic: profilgwz