The Asian economy is still recovering from the lows of the currency crisis of 1997/98, and although ...
The Asian economy is still recovering from the lows of the currency crisis of 1997/98, and although some countries show signs of improving there is still room for growth.
Stuart Parks, fund manager at Perpetual, says: "Asia is changing towards a domestic consumption bias and growth in the economy, but trade surplus has somewhat deteriorated. It has become more difficult to add extra growth from exports."
"However, economic recovery is dependent on overseas to take electronic exports. If we see a slow down in the US economy and no pick up in Japan, it will be harder for Asia to export."
He believes that China is showing the most improved characteristics in Asia, with retail sales and exports rising.
Hong Kong has been a proxy for China's growth, acting as a major trading connection for the rest of the world, and there are many companies that have business operations in China but are listed on the Hong Kong stock market.
Singapore continues to perform well, with GDP over 8% for the first half of the year, there is a strong current account surplus and competition is improving. The country has restructured operations to increase competitiveness, banks have re-valued the way they do business and companies have merged to improve returns.
Taiwan has performed well in the electronic sector and corporate governance is strong. But Parks' advice on Korea is to remain cautious.
He says: "While companies such as Sampsung electronics are performing well, economic reform has slowed down in the last six to nine months and needs to be restarted."
Edgar Goodchild, portfolio manager at Foreign and Colonial, says: "Korea has been driven by the rate of reform in the corporate and banking sectors. However, Korea is globally competitive and is recognised on a world level for its auto and electronic goods."
The Indonesian situation remains extremely difficult as politics continue to dominate. The country is faced with a large budget deficit, high interest rates and debt has made it hard for economic recovery.
Goodchild says: "Indonesia is beginning to show positive signs, the President has handed over the day to day rules to Megawati to help obtain a popular mandate. For effective change to take place, however, the Indonesian government needs to have a popular mandate and as Megawati has a large political consensus they hope to enhance this through her."
"Although GDP growth is 4.1%, the economy is in a bad way compared to other economies, the currency is severely weakened and have a bank debt," adds Goodchild.
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