| BUSINESSWEEK ONLINE : JUNE 28, 1999 ISSUE | ||||||||
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| BUSINESSWEEK INVESTOR
Y2K Doesn't Scare Emerging-Markets Pros Uneasy moments, sure. But no disaster is looming Jim Atkinson, a managing director at London-based money manager Investec Guinness Flight, wishes the millennium bug would fly away. He likens market jitters over Y2K to investor angst prior to the 1997 handover of Hong Kong to China. ''There wasn't a day for 18 months that we didn't receive questions about our China & Hong Kong fund,'' Atkinson says. In the end, the handover went smoothly, leaving markets unruffled, says Atkinson: ''The only massacre in Hong Kong was of thousands of chickens due to the flu.'' Atkinson and some other emerging-market pros believe that overall, the transition from 1999 to 2000 could be as easy. ''Disasters don't announce themselves 10 years ahead of time and march up on you slowly,'' says Atkinson. To be sure, the pros concede there will likely be uneasy moments in some countries--consultant GartnerGroup predicts water, transportation, and power outages in many developing countries. The latter, especially, could affect activity on stock exchanges. ''What if the markets don't open in Asia? Will we get advance warning?'' asks Don Sundue, who coordinates Y2K activities for State Street Global Advisors in Boston. Reflecting such concerns, some managers have been rejiggering portfolios to reduce their shareholders' exposure to potential trouble spots. Take Mark Breedon, the London-based manager of $474 million Alliance Worldwide Privatization Fund. He says his team and other Alliance execs routinely grill company managements on Y2K preparedness. But ''would any company write back and say they won't be ready?'' Breedon asks. In case they're not, Breedon says he may reduce his emerging-market holdings, now about 30% of the fund's assets, in favor of Europe. ''I'm pretty sanguine about our companies,'' insists Franklin Templeton emerging-market fund chief J. Mark Mobius. But even Mobius admits concerns about ''how banks in developing countries will fare'' after Dec. 31 because they're highly interconnected and rely on dependable electric power. Mobius has lowered the weighting of banks from 18% to 14% of his $12 billion in assets. But overall, Mobius argues that emerging markets may even offer safer Y2K havens than many developed countries, and he's sticking with Russian energy stocks. In the developing world, he maintains, many companies and economies are less reliant on computers--and those companies that have computerized probably are using Pentium-based, Y2K-ready systems. Moreover, Mobius says, emerging-market companies are battle-tested, routinely surviving power and phone outages, not to mention dysfunctional governments. STAND PAT? What's an individual shareholder to do? ''People don't need to be jumping all over the place,'' says Marsha Meyer, president of Chicago-based InvestEd, an independent investor education firm. But, she adds, ''they do need to be aware that this is going to occur and act in a prudent manner.'' Meyer says if you're concerned about Y2K problems abroad, now might be a good time to trim emerging-market fund holdings, especially if you'll need cash in the new year. Beware, though, of the tax consequences if you have run up big profits in 1999's rally in the sector. Or you might just want to stay put--as Josephine Jimenez, portfolio manager of the $330 million Montgomery Emerging Markets Fund, is doing. She's banking on Asia to continue climbing out of its economic morass. Even in the face of Y2K, ''this is the time to buy,'' declares Jimenez, who has more than 40% of her fund's assets in Asia, especially in South Korea, India, and Taiwan. ''Over the long term, when it comes to valuing companies, Y2K won't make a huge difference,'' adds Investec Guinness Flight Asian Chief Investment Officer Robert Conlen. Even if he's right, it's the short term that has some emerging-market investors on edge. BY TODD SHAPERA _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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