Asia continues to be a growth story with economies such as China and India recording strong gro...
Asia continues to be a growth story with economies such as China and India recording strong growth rates. Within a decade, these countries could evolve into global economic powers and we expect stock prices to reflect this growth as we move forward.
While the World Bank has lowered its 2003 growth forecast for East Asia by 1% and for the region on the whole, by 0.5% due to Sars, East Asia is expected to be the fastest-growing region in the world, indicating its strengthening economies. The economic growth rates of Asian markets are also generally higher than developed markets, with 7% growth expected in China, 5.9% in India and 4.4% in Thailand, for example.
cing some volatility along the way. Experienced investors will know it is this volatility that provides attractive investment opportunities, for clearly the best time to invest is when everyone around us is selling.
Another misconception is that the US and other developed countries are safer investment locations than emerging markets. There are many dangers, particularly in environments where investors feel safe believing the regulatory authorities can protect them from fraud and those becoming unsuspecting victims. We have learned the US and the developed world are not more transparent than emerging markets. The poor job being done by auditors in the US is proof of that.
But even if you assume emerging markets are more dangerous and less transparent than the US or developed markets, then you must ask: is this risk worth the possible returns? The answer would be yes. The simple answer would be higher returns. Emerging market investments offer different challenges to those present in developed markets, and those challenges are more diverse than those encountered in traditional investment arenas. That does not mean challenges do not exist in developed markets. It is just a matter of balancing the risks with the rewards.
China continues to be the most exciting and the fastest-growing economy in Asia, with its economy growing around 8% in 2002, mainly due to strengthening export growth, high government expenditure and strong consumer demand. China and the Association of South-East Asian Nations met last year to discuss a framework for negotiations to establish the largest free-trade bloc in the world. This should lead to greater benefits for China over the long term.
We remain positive on Korea despite some short-term volatility resulting from the uncertainty in North Korea and the financial scandal at SK Global. We believe this active involvement from President Roh Moo-hyun will lead to the reform of the chaebol conglomerates that have dominated the Korean business scene and are accused of many corporate governance violations. This should lead to great investor confidence in Korean companies in the long term.
Thailand's economy is recovering well. Thailand's recorded first quarter GDP growth was 6.3% year-on-year, supported by strong exports. We expect political stability to continue to attract investments to the country.
In Indonesia, the market is trading at attractive valuations and improvement in the country's judicial system should encourage more foreign direct investments.
The key aspect of Asian developments is the recovery from the Asian crisis. As a result of the currency devaluations, many countries have improved their foreign reserves and balance of payments positions dramatically. A considerable amount of reform has taken place with inefficient enterprises and banks merging or closing. Most Asian economies are in a stronger position to benefit from the global recovery.
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