Global valuations "reasonable"

"I decided to divide the world into three economic regions -- the Americas, Europe and the Far East -- and hold approximately one third of the portfolio in each region." He explains that each region has its merits and demerits. "It is difficult, at this juncture, to champion any one region."

It was interesting, he says, that the three regions differed sharply in their quarterly performance in 2012, as investor enthusiasm swung from one region to another. "Yet all three regions produced fairly similar results for the year as a whole."

Although he continues to analyze macroeconomic developments, Wong says that the equal-parts weighting for the three regions is allowing him concentrate more on his principal role as a stock picker. "I look for value opportunities within each region, and this often involves taking a contrarian stance."

"China continues to grow its share of the world's export market as it moves up the value-added manufacturing scale," says Wong.

Wong is well on the way to achieving his equal weighting in the three regions. Dynamic Global Value, which has 55 names, has 30% of its holdings in the Americas, with 25% in U.S.-based companies. Europe accounts for 27% and the Far East 36%, down from 40% a year ago.

"I have been taking profits in my China holdings across the board, which was my principal source of cash," says Wong. China now represents 13% of the fund. An example, he says, is a trimming of his position in China's AAC Technologies Holding Inc., a leading global manufacturer of miniature acoustics components used in smartphones and tablets. "This stock has had a good run."

While reducing his Far East exposure, Wong has been boosting his U.S. exposure and adding names in Europe. In addition to holdings in the three principal regions, Dynamic Global Value has 5% in the Middle East and North Africa and 2% in cash.

The fund's three heaviest sector weightings are financials (30.5% at the end of January), consumer discretionary stocks (26.2%) and industrials (21.6%).

Looking at the macro picture and starting with the Americas, Wong says that there are signs that U.S. economy is rebounding. The key housing sector is recovering and auto sales are strengthening, he says. "But there are still significant challenges to the economy."

In the short term, Washington has to deal with key issues outstanding with regards to the fiscal cliff. "Longer-term, there is the structural challenge of the U.S. deficit."

Turning to Europe, Wong considers that the worst of the European banking crisis is over. Furthermore, he adds, the fiscal positions of the financially strapped European countries are much improved. "The massive spending cuts have had their desired effect."

Also, Wong notes that labour costs in these countries are declining relative to those in the more robust Germany, and this will help their competitiveness. "But the European economy remains very sluggish and there is room for further deficit reduction."

In the Far East, says Wong, China's recovery is broadening. Despite skepticism in some circles, "China continues to grow its share of the world's export market as it moves up the value-added manufacturing scale." Wong says he is generally bullish on China, but already has a "sufficient weighting in this country in my global fund."

For India, he says, there's reason for optimism. "Interest rates are coming down and the government has streamlined the approval process for infrastructure projects."

Wong's global portfolio has a 3% weighting in Japan. The country's stock market is on a tear, mainly due to the steady decline in the yen, he says.

A Japanese stock that Wong added before the recent rally and one that is also based on his belief in the future of the smartphone is a mid-cap Japanese player, Anritsu. This global company's core business is the manufacture of test and measurement instruments for the communications industry, including wired and wireless. "The company is a leader in its field."

In Europe, Wong's emphasis is on global champions trading at discounts to their peers in the United States and Japan. He has also been selectively investing in European financials, "a contrarian call which has paid off."

A UK-based global leader in its field that illustrates Wong's investment strategy in Europe is Spectris PLC, which develops and markets measuring and test devices for the manufacturing industry around the world. "I bought the stock when it was at a 25% discount to its U.S. rivals and the discount has shrunk."

Wong's largest European financial holding is Lloyds Banking Group PLC, the biggest retail bank in the UK. The stock, which has had a strong run over the past year, still trades at a discount to its book value per share, he says.

Although many stocks within the European banking sector have had a good run, "the European financials still offer value," he says. There are ongoing concerns about their health and "they represent a significant underweight position in many institutional investor portfolios."

A major U.S. bank that has also had its fair share of challenges in the aftermath of the global financial crisis is Bank of America Corp. BAC, says Wong. This stock is among Dynamic Global Value's top 10 holdings.

The bank is a restructuring story. Wong says it has recapitalized and holds a commanding position in the U.S. banking industry. It is the largest deposit-taking institution in the United States and has a "strong exposure to the mortgage market." It is therefore well positioned to benefit from the housing recovery, he says.

A "best-in-class" U.S.-based auto-parts company "that is operationally aggressive and financially conservative" that Wong likes for its global reach and dominance in its niche is BorgWarner Inc. BWA. It is, he says, a leader in power-train technologies that improve fuel economy, emissions and performance. "This is an important goal of the auto industry globally."

		Bank of America Corp.	BorgWarner Inc.
	Feb 15 close	$12.03	$76.11
	52-week high/low	$12.42-$6.72	$87.45-$60.17
	Market cap	$129.7 billion	$8.8 billion
	Total % return 1Y*	55.1	-5.6
	Total % return 3Y*	-5.6	27.6
	Total % return 5Y*	-19.5	10.7
	*As of Feb. 15, 2013 All figures in U.S. dollars Source: Morningstar