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AN APPRAISAL OF ASIA-PACIFIC FUND INVESTMENT MARKET

Growth of Asia-Pacific Hedge Fund Market

The Asia-Pacific fund market had a pretty good year in 2003, as the overall global economic conditions improved following the World Trade Center terrorist attacks in New York City, managed assets in the region continued to grow from 2002 levels. Part of the reason is the rebounding global equity markets, as well as improving fund investment regulatory environment in most of the fund centers in the region. New fund products such as REITs, hedge funds, or equity income funds are increasingly available in major Asia-Pacific fund retail establishments. A few years back, the largest pension fund manager in the United States, CalPERS announced it has appropriated $75 million to Carlyle Asia Partners fund. Industry analysts projects that over $1000 billion are sitting in cash in the Asia-Pacific investment centers, such assets could be funneled into hedge funds and other alternative fund investment strategies, as many more investors in the region becomes familiar with hedge fund investment strategies.

Emerging Asia-Pacific Hedge Fund Markets

The regulatory authorities in Singapore, Hong Kong and Mainland China continue slowly but steadily to modify its fund investment, which traditionally have not favored foreign fund investment activities in those countries. Hong Kong and Singapore continues to improve their fund investment policies, geared towards attracting many more foreign investment players to their countries. The financial centers in Hong Kong and Singapore do provide vital services to the international investors, as well as financial institutions with a wide array of fiduciary duties and services, aimed at attracting such groups to establish a presence in their countries. Such competition undoubtedly is good for foreign fund companies seeking to expand into the Asian market.

China and India are also pursuing aggressive fund investment policies as well. According to published reports, the Indian fund market grew by an incredible 50% [$27 billion] during the first three quarters of 2003. With large populations, and growing technologically based economies, both India and China are also implementing desirable fund investment policies aimed at attracting major actors in the international fund market arena. Mainland Chinese city such as Shanghai is becoming a regional financial center, attracting many major and global financial institutions.

In Australia, the boom in real estate market continued to show signs it is running out of steam, there is the expectation that Australian real estate investors may shift some of their investment assets into other alternative investment portfolios with particular emphasis on mutual funds and hedge funds. There is also an added factor, which may help to facilitate the transition to fund investment portfolios in Australia- interest rates remain at record low levels. The retail fund market in Australia is valued at about $240 billion. For Japan, the trend is somewhat different, the reason being that the Japanese investor has always had an interest in foreign government bonds, particularly the US Government bonds.

In South Korea, the government continues to liberalize its alternative investment policies; such measures have led to increases in foreign investment firms doing business in the country, and have stimulated interest in other companies seeking to expand into the South Korean market. The recent troubles of S K Global, a major corporation have dampened the enthusiasm of investors in the fund market, near term, but such problem would not have long term consequences in the growth of alternative investments in the country. The negotiations by Prudential Financial to take a controlling stake at Hyundai Corporation is said to have reached an advance stage, such news would also bode well for the fund investment business in South Korea.

The Taiwan’s fund market is well advanced with very liberal regulatory environment, with about $65 billion of investment business; the fund sector in Taiwan would grow in the years to come. The Taiwan’s stock market offers a wide array of derivatives as well as futures instruments suitable for fund trading strategies. Many restrictions against foreign fund activities have been lifted, making it easier for foreign fund managers to participate in Taiwan’s fund management business.

These trends in the Asia Pacific Fund market are projected to continue in 2004, as the global economy continues to recover from the economic meltdown of the past several years.

Source: Paul Oranika
Editor-in Chief
Hedgeco.net

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