The investment case for the Far East is strengthening on the back of accelerating growth in the regi...
The investment case for the Far East is strengthening on the back of accelerating growth in the region.
According to Matthew Dobbs, director of Schroder Investment Management, growth in Asia is forecast to hit 6-7% this year.
He said: "The current accounts for the region have also expanded which means Asia is not so dependent on foreign capital flows as it was three years ago. The region does not look cheap but it is not expensive either.
"Asia is globally competitive in technology hardware manufacturing. Even if the technology sectors around the world correct, the amount of money companies are spending on technology is rising and will continue to rise. The companies that make technology components are firms we invest in.
"There has been a strong upswing in world semiconductor sales following the double dip recessions of 1996 to 1998. World semiconductor sales were seeing growth of over 30% by January this year and Asia can continue to increase its market share."
Dobbs pointed out mobile phone sales have huge potential in Asia with Thailand, China and Indonesia having among the lowest penetration rates in the region. Even in markets where there is a high penetration such as Hong Kong, Korea and Singapore, there is good growth potential as people look to buy more advanced phones.
The investment universe has broadened out in Asia over the past three years in terms of the relative market caps of countries and sectors offering more stockpicking opportunities.
Markets such as Korea and Taiwan have increased in relative importance in the region, while the regional index has less exposure to markets such as Indonesia, Malaysia and Thailand than three years ago.
Dobbs said the Asian markets are also no longer dominated by banks and property companies with services and capital equipment increasing in importance.
He added: "We are currently overweight in Korea and Taiwan and neutral on Hong Kong. We also have a tactical positive on Malaysia because we believe the currency is undervalued."
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