Of the Far East emerging markets, the Indonesian index has seen the greatest rise so far this year, ...
Of the Far East emerging markets, the Indonesian index has seen the greatest rise so far this year, up 24.70% in sterling terms.
From the start of the year to 26 May, the high double-digit returns of the Jakarta index are in contrast to more developed market returns such as the -4.18% sterling return from the Taiwan weighted index and the 6.31% fall in the Korean market, according to Bloomberg figures.
Taiwan has been affected by the Sars epidemic, while South Korea has been hampered by weak confidence as a result of the corruption investigations into SK Group, according to Angus Tulloch, manager of First State Asia Pacific fund.
Standard & Poor's upgraded Indonesia's sovereign debt last month, moving it to B- from CCC+, citing the diminishing prospect of the government seeking further debt restructuring. According to Hugh Young, managing director of Aberdeen Asia at Aberdeen Asset Managers, the upgrade is another boost to the country's stock market, which remains one of the best performers in Asia this year.
The Indonesian market has been led upwards by both the construction and building sector and financial services sector. The top 10 performers since the start of 2003 in the Indonesian market all achieved triple digit returns.
The best performer, Roda Panggon Harapan rose 387.51% to 26 May, while the second best, Equity Development, is up 247.79% in sterling terms. Both are investment companies. Roda invests in and developing property, while Equity Development specialises in financing, leasing and loans.
As at the end of March, Tulloch's Asia Pacific fund had no specific weighting to Indonesia, although he has been underweight the disappointing Taiwan market, with just 1.74% exposure compared with the benchmark, MSCI Asia Pacific Free (excluding Japan) weighting of 10.1%.
Tulloch has also been overweight Thailand, which is up 17.57% in sterling terms from 2 January to 26 May, with 5.4% compared with the benchmark weight of 1.5%.
Young's exposure to Indonesia in the Far East Emerging Economies fund, as of the end of April, was at 4.4%, but his higher weighting in double-digit return markets such as China and Thailand has aided performance. China, which has gained 15.92% in sterling terms this year, makes up 6% of the portfolio while Thailand constitutes 5.8%.
In the Asia Pacific unit trust, the weighting to Indonesia is at 3%, China is at 4.4% and Thailand makes up 6.5%.
Young says the effect of Sars in the region has inevitably led to a slowdown in trade and investment as decision-making is either slowed or deferred. He adds: 'Economists are suggesting that 0.5%-1% will be shaved from GDP growth in Hong Kong this year. A similar effect, at the lower end of the range, could be construed for Singapore. We would concur at this point with a 0.5% reduction for the region. But putting a number on this is largely a matter of speculation.'
In early May, China released monthly data for April, in what Aberdeen calls a rare move. It showed the economy growing by 8.9% year-on-year, down from 9.9% in the first quarter of 2003. The slowdown has been blamed mainly on the slowdown in consumption as a result of Sars.
Financials leading Indonesian market.
Thailand performing well.
S&P upgrades Indonesia to B-.
Sars blamed for China consumption slowdown.
Lack of confidence in South korea.
Singapore GDP growth expected to slow.
DB and a lack of alignment
Encouraging better use of tech
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