Investside

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JASON BOOTH

Staff Reporter

It’s been a good six months for James Rosenwald III.

The Redondo Beach money manager has seen his investments in Japanese equities rise by 50 percent since the start of the year. His Korean portfolio has made similar gains.

But with more than 30 years of experience investing in Asia, he knows when it is time to move on. So he’s heading south.

“After making so much money in the first half, it would be sad to lose it all in the second half,” he said.

His caution is heightened by the stock market meltdown that spread from Manila to Moscow between 1996 and 1998 a time when, he admits, he took a bath.

To keep that from happening again, he has pulled out of Korea altogether. In Japan he sold off much of his small caps and is taking a more defensive stance by buying up blue-chip companies.

And Rosenwald, whose firm Rosenwald Capital Management Inc. has around $125 million under management, is moving into equities in Thailand, Indonesia and the Philippines. The bet is that economic and political reforms, combined with a fresh round of foreign investment, will produce the kind of market gains seen earlier in Korea and Japan.

He’s also piling into Chinese debt. Fears that China will devalue its currency are driving up yields on Chinese bonds to attractive levels. He’s betting those fears are unfounded.

Rosenwald made his first investment in Asia in 1968, at the recommendation of his grandfather, a New York stockbroker. “He took me to the Japanese casino and I won massively. I’ve been addicted ever since,” he said.

But investing in Asia takes a serious commitment. He said that he spends about a month each year in the region, making about 50 to 75 company visits.

And like Warren Buffett, Rosenwald says that even in Asia it pays to invest in companies whose product you understand.

He said one of his best investments this year was inspired by his son, who asked him during visit to Japan to buy a Nintendo GameBoy featuring characters from a cartoon called “Pokemon.”

Rosenwald looked at the product, liked what he saw and bought the stock at the end of 1998. Spurred by the phenomenal popularity of “Pokemon,” Nintendo stock is up more than 60 percent so far this year, to an eight-year high.

Still, Rosenwald worries that some Asian countries will use the current flood of foreign investment to fuel unsustainable growth. “If they use this window as an excuse to leverage up, then all they will do is suffer down the line,” he said.

Even more worrying is the state of the U.S. market, he said. Just as Asia is recovering, the U.S. markets look like they might be topping out. If the U.S. market turns bearish, the Asian markets are almost sure to follow.

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