FUND MANAGERS TURN TO FINANCIALS

Companies adding positions to avoid fallout from a global trade war between US and China

THE rising tensions over global trade policy are prompting some topperforming international fund managers to look for the companies that can emerge as winners.

Fund managers from firms, including AllianceBernstein, Causeway Capital Management and Janus Henderson, are adding to positions in companies ranging from Italy’s largest bank to China’s largest e-commerce company, all in hopes of avoiding the fallout from a global trade war.

Chief among the corporate attributes fund managers are now looking for are either a strong domestic business that would not be significantly affected by import tariffs, or a dominant market position, or intellectual property that would prompt customers to continue to buy its goods regardless of additional taxes.

“The impact of a tariff is becoming a bigger factor in our decision-making,” said George Maris, a portfolio manager of the US$2.2 billion (RM8.79 billion) Janus Henderson Global Select fund.

United States President Donald Trump said he was pushing ahead with hefty tariffs on US$50 billion of Chinese imports on Friday, and the smoldering trade war between the world’s two largest economies showed signs of igniting.

China plans to hit back with additional tariffs of 25 per cent on about US$50 billion worth of US products, said its Commerce Ministry on Friday.

Trump laid out a list of more than 800 strategically important imports from China that would be subject to a 25 per cent tariff starting on July 6 including cars, the latest hardline stance on trade by a US president who has been wrangling with allies.

The threat of tariffs, along with rising US interest rates, helped sink global stock markets in February.

Since then, major stock indices have recovered most of their gains, with the US benchmark S&P 500 index up 4.91 per cent for the year to date and the Stoxx 600 index of companies in the European Union up 2.51 per cent over the same time.

Conor Muldoon, a portfolio manager of the US$8.7 billion Causeway International Value fund, said that trade and other macroeconomic concerns were “presenting short-term opportunities”.

The fund has been increasing its position in Italian bank UniCredit SpA, for instance, after its shares sold off in March following elections that renewed concerns about whether the country could exit the eurozone.

Muldoon’s fund is also increasing its position in pharmaceutical companies such as GlaxoSmithKline Plc and Japanese firm Takeda Pharmaceutical Co Ltd that have strong drug pipelines, he said.

Shares of GlaxoSmithKline are up 19.5 per cent for the year to date, while shares of Takeda are down 32 per cent over the same time after it increased its US$62 billion bid for London-listed Shire Plc.

Sammy Suzuki, a co-portfolio manager of the US$77 million AB International Strategic Core fund, said the threat of technological disruption in some markets was just as pressing a concern for some global companies as the impact of higher tariffs.

As a result, his fund is focusing more on what he calls the “enablers“, which are back-end tech firms that do not trade at as high valuations as companies like Amazon.com Inc and Netflix.

Spanish tech firm Amadeus It Group SA, for instance, provides the technology backing the reservation systems used by airlines including British Airways, Southwest, and Lufthansa Group. Shares of the company are up 20 per cent for the year to date.

Suzuki has also been increasing his position in European luxury goods makers such as Italian apparel company Moncler SpA and British alcoholic beverage company Diageo Plc, both of which make products that should not be significantly affected by rising global trade costs.