Far East investors' money devalues by one-third

Tens of thousands of investors who put money in Far East unit trusts have lost more than one- third of their value in the six months since Asia's economic crisis began.

As Andrew Verity reports, investors have withdrawn another pounds 1bn, leaving around pounds 5bn invested.

An investor who put pounds 1,000 into a Far East unit trust 18 months ago would now have investments worth less than pounds 600 on average, according to the most recent figures on fund managers' performance. That compares with pounds 924 just six months ago.

Investing pounds 1,000 in the worst performing fund, Fidelity's Asean fund, would lead to a value now of less than pounds 390, according to MoneyFacts, a performance measuring specialist.

Of funds investing in the Far East, but not Japan, even the best performers have seen devastating losses. In the same example, pounds 1,000 with another Fidelity fund, South-east Asia, would now be worth less than pounds 740.

Fund Research, an arm of Standard and Poor's which tracks the performance of unit trusts, said in a statement to clients: "It has been a market for brave investors only. None of the Asian markets has provided the sterling investor with a positive return over 12 months, losses ranging from 1.6 per cent in Taiwan to 70.3 per cent in Thailand."

Paradoxically, conservatively managed trusts such as HSBC's index fund have been hit hardest because they have avoided speculative "red chip" stocks in Hong Kong and stuck with blue chip investments.

Pat Cunningham, a Far East expert at Edinburgh Fund Managers, said: "The crisis in the Thai baht was only the tip of the iceberg. Companies had geared up with what they thought was cheap foreign debt, thinking that growth would go on forever and a day. When their currencies devalued, the foreign debt exploded their balance sheets."

Fund managers are being forced to sell hundreds of millions of pounds in shares to meet withdrawals and double the amount they hold in cash in order to limit exposure to further stock market falls.

Martin Harrison, managing director of Global Asset Management, said: "We now have more than 20 per cent of our fund in cash and two thirds of our money in Hong Kong. The rest is in Singapore. There's almost nothing in Thailand, Korea, Indonesia or Malaysia. By the beginning of the year we will be looking for bargains; very often there's a sharp spike upwards after such a downturn."

Fidelity said its Asean fund had performed badly because of a brief to invest in all South-east Asian countries except Hong Kong; its South-east Asia fund had poured money into the former colony.