Hong Kong property stocks are strengthening on the back of US interest rate cuts. The Hang Seng prop...
Hong Kong property stocks are strengthening on the back of US interest rate cuts. The Hang Seng property index is up 7.68% in sterling terms compared to a fall of 4.22% for the year to 7 March.
Abigail Rotheroe, director at Zurich Scudder and fund manager of the Threadneedle Asia Growth Fund, says: "In 2001, we expect a slower year for Asian growth than 2000. We expect growth to slow to 5% this year compared to 7% last year across the region."
However, China is one region that has been quite resilient to slow growth. Michael Bunker, investment director at GAM, says: "We are extremely optimistic about Hong Kong because of China. The economy is growing quite strongly."
In Hong Kong, the property markets are looking good, he says. The banks have record low loan deposit ratios with plenty of finance available, he says. Bunker holds SHK Properties, Hong Kong Land and Henderson Land as demand for residential property is building up and prices relative to incomes are the most affordable since the 1980s.
Bunker is also optimistic about Singapore as there still is significant restructuring to be undertaken in banks. The Monetary Authority of Singapore has said the banks have to sell off their industrial business and non-core properties, which will free up cash. The banks must improve their returns on capital employed to bring them into line with international standards and surplus cash may be used to buy back shares.
In Singapore, Bunker holds the DBS Group, OCBC and OUB, price to book of the last two being too low in a global comparison, he says. But Rotheroe believes the high beta markets, such as Korea and Taiwan, are starting to perform well and bounce back. The interest rate cuts in the US have supported these markets, she says. Technology and interest rate sensitive stocks have made a rebound as both were sold down heavily last year.
The Threadneedle Asia Growth Fund changed its portfolio in January to increase exposure to Taiwan and Korea.
Bunker says: "Korea has had major structural problems in industrial groups and the banking industries need to be restructured." He adds that shares have bounced back significantly after the sharp falls in 2000.
GAM has minimal investments in Thailand and the Philippines. Bunker says there has been a small recovery in Thailand, but the outlook for the banking sector is still shaky. In the Philippines, prospects have improved following the recent political changes, but it is expected that the country will take a long time to improve.
Fund analyst at Fidelity Julian Lau says the economic outlook in many parts of South East Asia is beginning to look a little mixed. He believes relatively strong GDP growth figures are obscuring a slowing trend in exports, but says the region's companies are expected to continue to deliver relatively strong earnings compared to the low earnings base seen in the aftermath of the economic crisis of 1998.
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