As provider of technology hardware to the world, Asia has had a difficult few months. To many invest...
As provider of technology hardware to the world, Asia has had a difficult few months. To many investors that makes it a region to avoid.
But we disagree. Instead we see the Far East as an area of considerable opportunity. Yes, it has had problems recently. But these have been confined mostly to sectors related to technology. And the problems in these sectors are global, not Asian. We believe that the best strategy is to seize chances while sentiment is negative, value is discounted and prices are low. But selectively is, as always, the key.
Singapore's economy is booming and the country's high growth is likely to be sustained through 2001. Growth in GDP is forecast at 9.6% this year and 7.1% in 2001. If these figures are realised, Singapore will be Asia's fastest growing economy. Strong exports and domestic consumption have driven growth.
China, too, is attractive. As the country's economy opens up to the rest of the world, and as its entry to the World Trade Organisation creeps ever closer, China's government is accelerating its reform programme. The size of the market alone offers immense opportunity. On a purchasing power parity basis, China is the world's second largest economy, and the prospects it offers are staggering.
Hong Kong is another market for which we are optimistic. Our focus there is on interest rate sensitive stocks, such as banks and property companies. Weak equity markets in the US, and growing concern about slowing global economies make it more likely that we will see lower interest rates early next year. This will benefit such sectors.
Nevertheless problems do remain. Many countries have significant structural problems which they need to address. Political instability continues in Indonesia, the Philippines and Thailand. Taiwan's government, too, is struggling, while South Korea has yet to deal satisfactorily with the enormous debt of its lumbering chaebols.
We have taken advantage of weakness in the markets of South Korea and Taiwan to increase our weighting there. We have held large underweight positions in both markets for several months. But Samsung Electronics and Taiwan Semiconductors, among others, now look to be good prospects. To fund these new purchases, we have reduced slightly our weighting to China. The significant position we held there has been a very successful one for us. Although these decisions may not be the right ones in the short term.
Overall, the outlook for Asia as we go into 2001 is one of opportunity. Parts of Asia are finally putting in place the necessary structure to regain - and sustain, the region's economic well being. Valuations are now more attractive than they have been since 1998. Markets are already discounting a significant slowdown in global growth, and recent economic data points to a peak in interest rates in both the US and Europe.
Adrian Mowat is director and head of Asia team at Martin Currie Investment Management
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