RPT-FUNDVIEW-Service sector key to emerging markets -JP Morgan

(Repeats to additional Reuters subscribers)

* Sees potential in service sector for emerging markets

* Says China wants to move away from manufacturing

* Says small caps less volatile than people think

FRANKFURT, June 2 (BestGrowthStock) – Emerging markets are looking
away from their traditional industries, and towards their
service and consumer sectors to help them grow, a JP Morgan
small cap fund manager said.

Greg Mattiko, manager of JP Morgan’s emerging markets small
cap fund (LU0318931358.LUF: ) said China was a perfect example.

“Chinese universities are cranking out skilled engineers at
the same rate as the country is cranking out those little
plastic toys,” he said at a presentation in Frankfurt.

This will inevitably lead to a strong service sector,
reinforced by technology giants such as Microsoft (MSFT.O: )
continuing to outsource in the country, he said.

“China has a desire to move away from being ‘manufacturer of
the world’ and towards the consumer service sector.”

Launched in November 2007, the fund has around $215 million
in assets.

“We know that small stock caps are inefficient and volatile,
but if you are a long-term investor looking to put a small cap
stock in a global context they are valuable,” said Mattiko.

After losing 62.8 percent between its launch and the end of
2008, the fund has managed a comeback and is now outperforming
its benchmark MSCI Emerging Markets small cap index
(.MIEF000S0GUS: ), booking cumulative growth of 43.7 percent,
compared to the benchmark’s 32.9 percent, since its launch.

VOLATILITY MISCONCEPTION

The fund chiefly holds assets in the information technology,
energy and health care sectors, spread across China, India,
Taiwan, South Korea and Brazil, as well as the United States.

Goldman Sachs predicts that by 2050, Brazil, Russia, India
and China, along with the United States, will be the world’s
largest economies.

The top 10 holdings of the fund include Chinese IT
outsourcing firm VanceInfo Technologies (VIT.N: ), Brazilian
software developer Totvs (TOTS3.SA: ) and Hong Kong’s Truly
International (0732.HK: )

“One company which is doing particularly well is Turkey’s
food retail store BIM (BIMAS.IS: ). It has significant multi-year
growth potential, a stable management team and a debt-free
balance sheet,” Mattiko said.

He also said India’s largest distiller, United Spirits
(UNSP.BO: ), and African Bank Investments (ABLJ.J: ), which provides
unsecured credit to working people, are two companies from the
consumer and service sector in the portfolio that have also seen
considerable growth.

Mattiko said the small cap market is not as volatile as many
people think it is.

“Although small caps have historically been less liquid and
carry a higher risk of financial distress than larger companies,
the difference in volatility is not as great as many believe.”

For the period between January 1989 and December 2006,
annualised market volatility for small caps amounted to 23.4
percent, only slightly more than for large caps where the figure
was 22.2 percent, he said.
(Reporting by Josie Cox; editing by Karen Foster)

RPT-FUNDVIEW-Service sector key to emerging markets -JP Morgan