A Strong Faith in Asia's Growth
As Beijing introduced measures during the second half of last year to slow industrial production, Cragg began selling "Chinese auxiliary companies." The fund has cut its holdings in Australia to 3 percent of assets and it no longer holds any shipping stocks.
Cragg has since moved money to Japan, where signs of increased consumer spending convinced him of the economy's recovery. He bought financial companies Nomura Holdings Inc., Sumitomo Realty & Development Co. and Jafco Co., boosting Japan to 30 percent of the fund as of June 2004, from 10 percent last year.
He also raised Malaysia to 7 percent of the fund's holdings, from 3 percent in 2003. In anticipation that Prime Minister Abdullah Ahmad Badawi's efforts to balance the budget and fight corruption would lure overseas investors, Cragg bought shares including financial company OSK Holdings.
At the same time, concern about higher U.S. interest rates prompted Cragg to seek dividend income by holding stocks such as Singapore Press Holdings. He also doubled his fund's cash position to 10 percent in June, from an average 5 percent last year.
Singapore Press, which publishes 15 of the city's 17 newspapers, offers both a guaranteed payout and a chance to bet on an economic rebound, Cragg said. Singapore's government has forecast the economy will expand as much as 7.5 percent this year, up from 1.1 percent in 2003.
"The chunk of paper that's devoted to classified ads in Singapore is growing rapidly," Cragg said. "It's a classic play on the recovery."
The stock has a dividend yield of 4 percent, compared with the Straits Times index's 3.5 percent yield.
Strong Asia Pacific Fund owns about 60 stocks and holds them on average for 12 months. It invests in smaller companies with faster growth prospects that have yet to become household names, a task that Cragg likens to planting seedlings.
Pantaloon Retail India, with a market value of $134 million, plans to open as many as 34 new stores by 2005 to almost double its number of outlets.
The attention to small companies and willingness to invest across the region sets the Strong Asia fund apart, said Bill Rocco, an industry analyst at Morningstar Inc. in Chicago. The fund "is an oddball in the group," he said.
Sometimes it takes time to see the benefits. Cragg bought Pantaloon's stock at 340 rupees ($7.40) in February. The shares, which make up 1.5 percent of the fund, closed at 321.1 rupees Friday on the Bombay Stock Exchange.
"Eventually the spotlight will come on them," Cragg said.
© 2004 The Washington Post Company