Newton Asian Income manager Jason Pidcock says he is “relatively cautious” on Asia and is holding 7 per cent in cash, a high drag on an income fund.
His move into cash is recent and driven by the disconnect between price levels and the slowdown in demand, particularly from China.
“It’s the highest it’s ever been. It’s very unusual for me to have cash at that level, but I think the price is likely to come back.
“The global index has reached quite a vertical level and we’ve had quite a spike since the middle of September.”
He expects to put the £4.96bn fund’s cash to work when prices fall back to more compelling levels.
The amount of Chinese debt held in US or Hong Kong currency means the property market is susceptible to an abrupt fall in the renminbi, Pidcock says.
The Chinese denomination has risen strongly against the dollar while others have fallen away and is beginning to look precarious, he argues.
Despite the depressed state of commodities and his bearish view on China, he is optimistic on Australia – “the United States of the region”.
BHP Billiton is the only miner of the fund’s holdings in Australia, with the fund looking instead for well-managed companies in a solid political and social environment.
“Australia is the fastest growing population in the world,” he adds.
The fund has a third of the portfolio invested in Australia, compared to the FTSE AW Asia Pacific ex Japan index’s 24 per cent.