The near future of Asian markets seems to have brightened as the negative impact of SARS and North K...
The near future of Asian markets seems to have brightened as the negative impact of SARS and North Korea appeare to have peaked says investment house Govett.
Its chief investment officer Asia Christian Dangerfield says prospects for Asian markets are looking good.
"Now that the most immediate impact of SARS and North Korea have been discounted, Asian markets are likely to outperform their global counterparts – barring, of course, any further adverse developments – both on the upside and the downside," Dangerfield says.
"Much depends on whether the S&P 500 can get above the crucial 950 resistance level, which has capped all previous rallies in the last 9 months. If it can, then Asia risks being seen as a laggard to the US, trading on rock bottom valuations. If however, the rally fails at that level, then Asia will suffer less profit-taking than other markets."
"On a three month risk-reward basis, Asia is very attractive in relative terms."
But Dangerfield also calls for caution as "Asian markets have underperformed significantly" in the last couple of months.
Even though the number of SARS cases being reported in Hong Kong and Singapore has begun to recede, it will yet take some time before consumer confidence in the two cities returns, he says.
And the North Korean situation is even more complex, he adds.
"Of two things we can be sure – first, Kim Jong II is engaged in a game of high stakes poker which he almost certainly has to win in order to save his regime and secondly, the Bush administration has no intention of being bullied by a member of the axis of evil into paying hush money."
"Although this issue is likely to test the markets for some months, it is our view that the situation will be resolved peacefully. We nonetheless remain underweight to our benchmark for the time being."
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