Highly leveraged play on US economic recovery By Chris Tracey, investment director The regiona...
Highly leveraged play on US economic recovery
By Chris Tracey, investment director
The regional index rose by some 8%, not surprisingly led by Korea and Taiwan thanks to their significant technology content as NASDAQ rallied. Exports have continued to deteriorate, with those from Korea, for example, falling by 19.3% year on year in October versus September's 17% decline. Taiwanese exports fared even worse, falling by 26.8% in September, which was their largest decline since records began in 1981. The Singaporean economy, the most export orientated of the Asian region, fell by an annualised 9.9% in the third quarter and the authorities now expect the economy to shrink by 3% for the calendar year. The one relatively bright spark is the Chinese economy, which grew by 7% in the third quarter against a rate of 7.9% for the first six months of the year, but even here the rate of export growth has fallen significantly from 27.8% for the calendar year 2000 to 7% for the first nine months of the current year.
The large Korean technology company Samsung warned that it did not expect to see any recovery in semiconductor prices until the second half of next year, but we would expect the rate of decline in demand to start levelling out early in the first quarter. We expect profits regionally to fall by some 17%, a figure helped by some significant cost cutting but also inflated by a collapse in technology profits. Valuations remain very low, but so does visibility and, as we stated last month, the region is the most leveraged play on a recovery in the US economy whenever that may be, so we want to be buyers although not quite yet.
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Launching later in 2019
£80bn funds under calculation