Positive outlook for equities in South East Asia, according to New Star's Ian Beattie

04.05.2007

The New Star Asian Opportunities Fund, managed by Ian Beattie and Lucy Bernays, has delivered top quartile performance since its launch in 2002*.

The fund, a sub-fund of the New Star Global Investment Funds PLC, combines a bottom-up stock-picking approach with top-down asset allocation.

In the first three months of 2007, the fund gained 4.5% against a 1.0% rise in the MSCI AC Asia excluding Japan Total Return Index*. Since launch, it has gained 170.8% against a 162.4% rise in the index*.

Below, Ian, who is head of Asian equities at New Star, looks back at a volatile first quarter for stock markets and explains why the outlook remains positive.

Equity markets in Asia excluding Japan recovered from the correction in late February and early March to finish the first quarter in positive territory. The Chinese stock market was partly responsible for triggering the global market wobble although concerns about the US economy also played a significant part.

Equity valuations in China had become somewhat overstretched but the correction did not lead to a more prolonged sell-off. The fundamental factors supporting Asian economic growth remained firm and the dip was used by the fund to strengthen positions in quality holdings that had been unduly punished.

From a macroeconomic viewpoint, markets in South East Asia, which tend to benefit from abundant global liquidity, currently look better placed than their counterparts in North East Asia, where growth is more closely tied to US consumer trends.

The China/Hong Kong region remains a firm favourite of the fund. Gross domestic product growth in China continues annually at about 10% and this provides a supportive backdrop for individual companies. The property market in China/Hong Kong, in common with much of the rest of South East Asia, appears reasonable value compared to wages and the development of urban centres provides interesting investment opportunities. Among individual stocks held by the fund in China/Hong Kong, Shenzhen Investment posted strong gains while PYI Corp benefited from increased government spending on infrastructure.

Other growth markets in South East Asia include Vietnam and the Philippines. The fund has benefited from its overweight position in Vietnam in recent years and took some profits as valuations began to look overstretched. The Philippines could be another attractive market.

Economic stability and reform are being pushed up the political agenda, making the market increasingly attractive to foreign investors. The fund’s holdings in the Philippines, including Banco de Oro and SM Investments, contributed strongly to performance over the first quarter of 2007.

OUTLOOK FOR ASIA EXCLUDING JAPAN

At the quarter end, the outlook for the Asia excluding Japan region appeared positive. Asia has lower corporate debt levels relative to the rest of the world and has benefited from structural improvements in corporate profitability.

While valuations are not as cheap as a few years ago, this is also the case elsewhere in the world and in Asia the price rises appear well supported. Any concerns are, therefore, likely to centre on general problems affecting the global economy and, currently, there are no major obstacles. Abundant global liquidity persists and there is little evidence to suggest a protracted US economic slowdown.

In this environment, the fund will continue to focus on quality stocks that have the potential to maximise returns for investors.

FAVOURED STOCKS

Rexcapital

This Chinese company invests in the country’s fast-growing gaming and scratch card industry. With its strong management team, Rexcapital has recently been working towards expanding its operations in what appears to be a market with significant potential.

Heng Tai

This China-based company specialises in importing and distributing consumable goods, household items and fresh fruit and vegetables. As demand increases in China for high-quality consumables, Heng Tai is able to provide a distribution network for foreign producers seeking to access this potentially vast marketplace. The company also stands to benefit from any upward revaluation of the Chinese currency.

- Ends -

For further information, please contact Trina Arthur at New Star International on +44 (0)20 7225 9574.

New Star important facts:

NOTES TO EDITORS:

New Star, one of the UK’s fastest growing fund management companies, was founded in June 2000 by John Duffield, previously the founder of Jupiter Asset Management, which he built into one of the most successful retail investment businesses in the UK.
New Star is expanding its international business in response to the growing demand from investors in Continental Europe. The aim is to become a leading mutual fund provider in the next few years, offering international investors the investment expertise of one of the fastest growing and most successful UK fund management groups.
New Star’s international strategy is to develop key partnerships in local markets.
New Star International’s website can be found at www.newstaram.com.

Past performance is not necessarily a guide to future performance. The opinions expressed here represent the views of the fund manager at the time of preparation and should not be interpreted as investment advice.

IMPORTANT INFORMATION

Past performance is not necessarily a guide to future performance. The value of investments and any income from them may fall as well as rise and investors may not get back the amount originally invested. The value of investments may also increase or decrease as a result of changes in exchange rates between currencies. Investments involve certain risks, as described in the relevant prospectus. Any opinions expressed in this document may vary without prior notice and do not constitute investment advice.

This document should not be distributed to any third parties and does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Distribution of this document and the offering of shares in certain jurisdictions may be restricted and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. If this is the case, these funds cannot be the subject of active marketing in your jurisdiction.

The fund mentioned in this document should be viewed as an investment suitable only for investors who can fully evaluate and bear the risks involved. Full details of the fund can be found in the prospectus or offering document, in the case of Hong Kong. Any investment decision must be made solely on the basis of the information contained in the prospectus/offering document, which is available on request from New Star. The simplified prospectus and most recent annual and interim reports are also available upon request.

The shares referred to in this document have not been and will not be registered under any United States securities laws, and, except in a transaction that does not violate the United States securities laws, may not be directly or indirectly offered or sold in the United States of America, or any of its territories or possessions, or areas subject to its jurisdiction or to or for the benefit of a United States person.

The fund mentioned in this document is not registered for distribution except as noted below. The New Star Global Investment Funds PLC (the Fund) is regulated by the Irish Financial Services Regulatory Authority (Irish Financial Regulator).

The Fund, of which the New Star Asian Opportunities Fund is a sub-fund, should be viewed as an investment suitable only for investors who can fully evaluate and bear the risks involved.

The manager of the Fund, New Star Investment Funds (Ireland) Limited, is regulated by the Irish Financial Regulator. The investment manager, New Star Asset Management Limited, is regulated by the Financial Services Authority of the United Kingdom (the FSA). The custodian is State Street Custodial Services (Ireland) Limited.

The Carnegie Fund Services SA, 20 rue du Conseil Général, 1205 Genève, Suisse (Postal address: Casa Postale 5656, 1211 Genève 11), Tel: +41 22 7051177, Fax: +41 22 7051179 has been appointed as the representative of the Fund in Switzerland. For Hong Kong: The Fund has been authorised by the Securities and Futures Commission (the SFC). Authorisation by the SFC does not in anyway imply any official approval or recommendation by the SFC. In Singapore the sub-funds are recognised as Restricted Collective Investment Schemes by the Monetary Authority of Singapore.

This document has not been verified or approved by any relevant supervisory authority in the jurisdictions where the Fund is registered.

Issued by New Star Asset Management (Bermuda) Limited.