Jeffrey Lum has almost doubled technology exposure in the Marlborough Far East Growth fund over the first quarter of the year.
Lum, the ARN Investment Partners manager, has taken the £29m fund’s tech exposure from 12% to 21% this year on the belief the sector has favourable supply and demand dynamics.
“During the past two years, corporate spending on IT has been withheld and as a result technology firms have cut back on their capital expenditure,” Lum says. “Now companies are beginning to upgrade their IT systems, while supply is constrained. These companies also continue to trade on attractive valuations of 10x to 11x P/E.”
Lum has also removed a 5% holding in HSBC.
“We were quite disappointed by the final quarter results which showed their exposure to Western countries is still affecting their profitability,” he says. “Although we think they are strong, we think the price will continue to hover around its current level.”
The manager added a 2% position in car distribution and repair company Zhongsheng Group.
“Demand for cars is growing quickly in China and although the margins on distribution are limited, they are 50% for repairs,” he says.
“We think over time the focus of the business will shift more to repairs. Also, there is plenty of opportunity for consolidation in the distribution market. This is a high growth company.”
Other geographic changes to the portfolio include cutting Thailand from 5% to 1.5% and trimming Singapore from 14% to 8%. The fund retains a 47% weighting to Hong Kong and China.
“During the protests in Thailand last year, we increased our holdings at a time when other investors were exiting,” he adds. “These stocks have performed well and we do not know what will happen in the country this year so we have decided to take some profit.”
