markets & strategies
Many Asian countries have not been as badly affected by Severe Acute Respiratory Syndrome (Sars) as initially feared, according to Baring Asset Management (BAM).
The firm is optimistic about the medium to long- term investment opportunities available in the region, especially by Asian emerging countries.
BAM estimates the effect of Sars will result in knocking about half a percentage point off economic growth in Asia for 2003, which ' although significant ' is not enough to derail overall growth in the region.
Since April lows, the MSCI All Countries Far East Free ex-Japan Index has risen 25% in US dollar terms to date. This is significantly ahead of the MSCI World Index which has appreciated by less than half that figure in US dollar terms over the same period.
'In spite of the rise over the past quarter, Asia Pacific markets remain cheap relative to local bond yields. In addition, relative to global peers, they offer a more sustainable medium-term growth potential and some attractive share price valuations,' said Khiem Do, head of Asia Pacific equities at BAM.
'At the same time, Asia has benefited from various external factors such as the weakness of the US dollar which has made Asian exports more price competitive overseas.
'The authorities' determination to reflate the US economy and stimulate demand has also helped to drive growth in Asia,' he added.
Meanwhile, on a local level, there are a number of positive trends developing. In Hong Kong there is a growing sense of positive change in the leadership, following the successful protest against implementation of article 23 of the Basic Law, which threatened to restrict freedom of expression.
BAM is more positive on Hong Kong, as both the Chinese and Hong Kong governments have been implementing new policies to boost tourism and domestic growth.
Prospects for Japan are also improving with BAM moving from a neutral to overweight position for the first time in 10 years.
However, there is still some way to go with the fund manager cautious until domestic investors follow international interest in the region.
In Singapore, loan growth and inter-bank rates have risen, a positive sign of an emerging domestic recovery.
In Taiwan, the government is proposing to liberalise the regulations for foreign investors, allowing them to buy local shares more freely, while the Philippines and Indonesia have both benefited from an additional reduction in short-term interest rates following the lead set by the US.
Paul Bruns and Elaine Parkes
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From 3 to 10 October