Stuart Parks, head of Asian equities at Invesco Perpetual, speaks to What Investment.co.uk about the current investment strategy of the fund 

Name: Stuart Parks
Job title: Head of Asian equities
Fund: Invesco Perpetual Pacific fund
Sector: IMA Asia Pacific (including Japan)

£1,000 invested in this fund over five years would have grown to £1,894 (as at 31 December 2009), making it the second best performer over that period in its sector.

Q. What are the current investment parameters of the fund?
A. We invest in the whole of Asia, including Japan and Australia.

Q. How has your investment strategy in Japan changed over the past year?
A. We have had a consistently underweight position in Japan over the past 3 years but, over the past year or so, we have rebuilt the positions. Now it is 40 per cent.

Historically, it has been the case that Japan didn’t have much growth. I guess, what has changed is that Japan now looks very cheap on a price to book value, against its Asian counterparts.

Within Japan itself, although we don’t think there will be much economic growth, you can find a number of stocks that are taking advantage of their global competitiveness. Stocks like Toyota and Honda, which have been performing quite well over the past year or so.

On the Pacific fund, we have been increasing the Japanese weighting and we expect that to continue. We are positive about both Japan and non-Japan Asia. We think that both can offer positive absolute share price returns.

Q. Geographically, where would you say the other core parts of the portfolio are centred?
A. The other major book is China and HK together. That is 15 per cent of the portfolio. The Chinese economy was the first economy to recover from the recessionary conditions as a result of the fiscal stimulus.

That has continued on into 2009 and has led to a strong earnings recovery for a number of stocks in the Chinese universe. Many Chinese companies have cut costs and this has led to profits growth being much greater than could have been expected at the start of last year. We now expect that trend to continue into 2010.

Within China and Hong Kong, we have had sizeable positions in property companies, as we believe strong economic growth and strong interest rates will encourage the population buy property.

One of the major stocks is Wharf Holdings – a conglomerate in Hong Kong, which has large property exposure. That is about two per cent of the portfolio right now.

Q. What is the largest holding in the portfolio at the moment?
A. Some of the stocks are as high as five per cent of the fund, such as Samsung Electronics, for instance.

Q. What are your other favoured holdings of note?
A. China Taiping Insurance Group is a life insurance company based in China that has been growing its business at 40 per cent per annum and has been a very strong performer in stock market terms. We have had that for the past three years. In fact, our overall financial weighting is overweight.

Q. What is your team’s outlook for the region in 2010?
A. I find it unlikely that the returns made in 2009 will be replicated in 2010. There will be increased volatility, although, a positive return will be made overall.

The things we are more worried about is the possibility for interest rates to rise in Asia, Ex-Japan. As inflationary pressures start to build, it is highly likely that might be negative for markets in the short term