Top Fund Managers Give Investment Suggestions for 2010

2009 has been a difficult year for fund managers. The rally in global stock markets, including Korea’s, has led to an earnings recovery for most funds.

The problem, however, is that the funds are struggling to decide whether to resell funds whose principals were recovered and if so, when. They must also deal with foreign funds whose tax exemption periods have ended.

With less than a month to go before the end of the year, the funds are in another bind because they must make investments for next year, which is filled with uncertainty.

The Dong-A Ilbo yesterday polled representative fund managers of Korea’s top 10 securities companies on the best investment strategies for next year.

Most of them suggested investing in domestic equity funds, China funds, Brazil funds, and commodities funds. Among domestic equity funds, they recommended investment in funds incorporating large-cap stocks given the high possibility of the rise in large-cap blue chips next year.

Lee Yong-kyu of Mirae Asset Securities said, “The rally of large-cap blue chip stocks, which are favored by foreign investors, is likely to continue. So maintaining a certain share of group funds is recommended.”

Most of the fund managers, however, urged investors to lower their expectations for rates of return on their investment because the prices of large-cap stocks have soared this year.

They said China and Brazil funds are the most promising among foreign funds next year. Brazil funds are expected to perform well due to rising prices of raw materials and Brazil’s hosting of the 2014 World Cup and the 2016 Summer Olympics.

The Chinese stock market is expected to also fare well as its government will continue macroeconomic stimulus measures next year.

Four of the 10 fund managers chose Korea Navigator Fund of Korea Investment Trust Management as the best new investment item next year.

Answers were mixed over which funds to sell when investors reconstitute their portfolios. Many recommended disposing of foreign equity funds except China funds, global REIT funds, and Japan funds.

Lee Jeong-eun of Prudential Investment & Securities said, “Japan funds are not attractive since Japan could experience deflation for more than three years and the yen is expected to stay strong for the time being.”

Global REIT funds were not considered a good choice as risk in the commercial property market remains and recovery will take a long time.

Certain managers advised lowering exposure to Russia funds that performed well on the back of rising oil prices, citing uncertainty in the Russian financial market and the country’s weak economic fundamentals.

Park Hyeon-cheol of Meritz Securities said, “Investing in Russia funds under the expectation of rising oil prices is undesirable,” adding, “If investors expect an increase in commodity prices, they’d better invest in commodities and Brazil funds.”

crystal@donga.com