Stephen’s Posterous

The effects of the recession and tightened credit markets have made themselves well known in the United States, but the slowdown is having a profound effect on economies overseas as well. Iain Clark, chief investment officer for Henderson Global Investors, admits it is a tricky time for investors to make stock bets in Europe and Asia.

But the London-based fund manager does have some stock-picking tips to share. It is difficult to judge when any economy will recover from the current downturn, and many have been wrong in the past. But by focusing on companies that aren't beholden to the credit markets and have staying power, investors can wait out the storm, according to Clark.

Below are some excerpts from his interview with Barrons.com about Henderson's International Opportunities Fund (ticker: HFOAX).

Barrons.com: You have investments in Europe and some in Asia as well. How should investors approach these economies, as there are fears they will suffer from a prolonged recession?

Iain Clark: Our strategy is to focus on two things: quality companies with sound balance sheets. When I say sound balance sheets, I don't just mean with lots of cash. Companies can have a bit of debt, but it must be fairly modest and must be longer term because if you have to refinance debt in the next year or two, I think you are still going to have a major problem.

It doesn't necessarily mean traditionally defensive stocks. We don't know how deep this recession might get. It may still get a little bit deeper. But these companies are still going to be around in one year or three years, they seem reasonably safe from that point of view. We are focused on soundly financed [companies that are], generally, the quality end of the spectrum.

Q: Obviously you are taking a company-by-company approach to this. But do you have a larger sense of what economies might bounce back first?

A: It's very difficult to make that judgment right now. Our focus is on individual stocks, and the overall balance of the fund is more from the particular stocks that we own. I am sort of happy with the China story, but elsewhere I think it's very difficult to tell.

The U.K. is an interesting case because the government and the central bank are being a lot more proactive in trying to get out of the recession. But the U.K. probably had a bigger set of problems in the first place. We have quite high debt levels in comparison to Europe and, obviously, we have probably more banking problems than the rest of Europe. So I think it's very difficult to tell in that situation whether we are going to come out of the recession ahead of France or Germany.

Germany is very dependent upon exports. Exports have been heading down very rapidly for the last few months, but the domestic economy is probably sort of OK. Unemployment will start to rise before too long, but not too badly. At the same time [unlike the U.K.], Germany is not really doing much to help the economy, just little bits and pieces here and there.

So while the problems of Europe are not as bad as the U.K., equally the European governments and central banks are doing rather less to try to get out of it. I wouldn't put any bets on who comes out of this first, but my personal view is that the U.K. will be first, it will be a bit more entrepreneurial than the rest of Europe.

Q: You mentioned you were optimistic about China?

A: The situation in China is quite simple except you are dealing with very big numbers. We know that exports are collapsing, and that's quite a large part of the economy. But what we also know is that their authoritarian government is spending huge amounts of money, we say about 6% or 7% of the gross national product, which is bound to have an impact.

Take infrastructure spending in the power-generation area, for example: They already have a six-to-seven-year plan in place, so when they decide that they are going to spend money, they just bring all of that forward. They tell the banks to lend and, within a few days, the money starts flowing and the business starts getting done.

If you are in the U.K. or the U.S., you have to spend three to six months running around the politicians, trying to get support for a large spending package. You have to work out what it is actually going to be spent on. Then the banks have to do a bit of lending, and maybe one to two years later something starts to happen. So there's a huge difference in China in terms of the speed of execution.

They were running a small budget surplus before they went into this [recession], and their total debt as a percentage of GNP is very low compared to a lot of other countries, so they do have the financial firepower to introduce these major measures. Virtually no one else has that sort of combination.

If you look at India, there's no question that they need lots of infrastructure spending. But they don't have the total financial firepower that China has. India is still a democracy, and so they can't just decide to do something.

I am still slightly hesitant because I think China has been quite a popular play already. But the stock market, as you may recall, fell incredibly sharply last year. A stock that we have been happy to add to over the course of this year is China Mobile (CHL). Again, this is not an unknown stock, but it is the No. 1 player by miles in China. We think this company still looks pretty cheap and has plenty of opportunities for growth.

Q: Are there any other companies that you'd like to mention that fit your quality and balance-sheet criteria?

A: Germany's Fresenius Medical Care (FMS) is the biggest player in kidney dialysis; it benefits from the increasing [rates] of diabetes and other illnesses. The medicines and treatments that it produces are more and more needed, it is growing very steadily. It has recently raised some capital in the bond markets. But it is a soundly financed company. It is not really as battered as other companies are by the fact that the economies go up and down, because demand is so constant and growing for its medical products.

Q: Thanks for your time.

Source. Subscribe to Barron's. Henderson's International Opportunities Fund.

The Bill and Melinda Gates Foundation and a mobile-phone-industry trade group are experimenting with programs that let consumers in Asia, Africa and Latin America access financial services through their cellphones, part of a broader effort to turn mobile phones into a financial tool in developing countries.

The philanthropists and the GSM Association said they studied how existing mobile-finance programs are being used, and are now working with banks, mobile operators, governments and microfinance organizations to pilot 20 new mobile-banking programs. The work is to be funded by a $12.5 million grant from the Gates Foundation, which earlier this year said it would boost investment into programs to promote savings in developing countries.

The GSMA is an industry group that includes leading mobile operators from around the world, such as Vodafone Group PLC, China Mobile Communications Corp. and AT&T Inc. The association is holding its annual conference this week in Barcelona. The partnership is part of a broad endeavor to turn the cellphone into a tool for accessing savings and other financial services in emerging countries.

The explosion in recent years of microcredit plans in developing countries has a host of nonprofits, cellphone operators and governments experimenting with ways of reaching people in rural areas without bank branches. The industry has a model in M-PESA, a payment service in Kenya run by operators Safaricom Ltd. and Vodafone. M-PESA has attracted millions of clients since it was launched in 2007.

While an enticing concept, banking by phone in developing countries faces major obstacles, including a mix of banking regulations that limit how financial services can be offered. In Kenya, those regulations are loose, allowing services such as M-PESA. Indian authorities, meanwhile, are still sorting out their mobile-banking policies.

"This is going to play out somewhat differently in any number of countries," said Bob Christen, director of the Gates Foundation group that invests in financial services for the poor.

Source.