Flemings is neutral on the Far East but is looking to move to a positive stance once the volatility ...
Flemings is neutral on the Far East but is looking to move to a positive stance once the volatility in Nasdaq subsides. Over the long term it is positive on the market, according to Chris Tracey, investment director.
The advantage in Asia, according to Tracey, is that it has already been through an economic crisis, which started with the collapse of the economy in 1997. As a result there has been strong corporate restructuring and the banking system, although weak, still has capacity to lend.
He says: "Asia now looks to be at the right end of the cycle and we expect outperformance."
This is particularly the case in terms of technology and telecom stocks, where there is further room for strong growth in Flemings' eyes.
Tracey says: "In terms of mobile telephony we can expect strong growth, particularly in China where there is currently low fixed line penetration. The density of the population, and the availability of mobile phones means that much of the population will leap frog from not having a fixed line phone, to owning a mobile phone."
Another positive is the big shift toward outsourcing from, America, Europe and Japan, to the Far East, says Tracey. This trend is picking up pace as deflation in technology products like computers, means manufacturers have to look for cheaper components to remain competitive.
Tracey adds that in terms of technology, Taiwan and Korea are leaders in semiconductor manufacturing and offer good valuations relative to the developed world.
Investec Guinness Flight meanwhile is positive on technology in Asia, believing the region has a sizeable stake in the technology revolution from several angles.
Asia is a major manufacturer of hardware and as products become more advanced and shrink in size, the value-adding opportunities are increasing, according to Robert Conlon, fund manager at Investec.
He says Taiwan Semiconductor and Samsung Electronics are leading Asian companies in the semiconductor industry.
As the world's leading independent foundry company, Taiwan Semiconductor is benefiting from increasing demand for integrated circuits which are contained in almost every product, including mobile phones and computers.
Conlon says: "Many design companies cannot manufacturer their own designs in house, and therefore they outsource the manufacturing to industry leaders such as Taiwan Semiconductors."
He adds that Asian use of both mobile communications and the internet is expected to grow rapidly. The number of Asian internet users has almost doubled during 1999 to around 18 million. More than 100 million are expected to be online by 2005. Local Asian telephone companies generally dominate the Internet Service Provider (ISP) market.
Conlon adds: "The media companies comprise another ind-ustry that is likely to benefit from the increased use of the intent. In the short term, heavy advertising expenditure by the dot.com companies, the mobile operators and the ISPs is resulting in strong growth."
A negative for Asia, according to Tracey, is the effect of an inevitable slowdown in the US economy. Tracey says when that happens, this will impact on imports from Asia.
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