Despite exceptional returns last year, fund managers believe the Asian recovery is just beginning. Te...
Edmund Harriss, fund manager at Investec Guinness Flight Asia, says: "Asia is in the early stages of a powerful cyclical recovery. The crisis has restored competitiveness as the cost of labour, asset prices and currencies have fallen.
"Rising trade surpluses and a pick-up in foreign investment have reduced the foreign debt burden. Inflation has now stabilised at low levels and the revival of domestic consumption is already becoming apparent in a number of countries."
Those companies that went into the crisis in the best financial shape have emerged the winners, Harriss says, although they too have had to re-appraise the way they operate.
"Many businesses are still in the process of restructuring through disposing of non-core businesses and writing off non-performing assets. The problem of poor returns on investment - one of the main causes of the crisis - is also being addressed with more realistic investment hurdle rates for allocation of new capital. This will have the effect of improving shareholder returns and transparency, and lead to higher share prices. Investors will do well to focus on the continuing growth in the technology sector."
The technology theme will be supported by continued growth in demand for PCs, mobile phones and data communications equipment, according to Harriss.
"Asia now provides specialist-manufacturing facilities for these items with Korea being the world's largest supplier of memory chips and Taiwan one of the leading suppliers of electronic components. Singapore and Malaysia are also favoured manufacturing centres for the major multinational electronics companies."
Khiem Do, head of Asia Pacific Specialist Investment, said: "External and domestic factors should be positive for Asian markets in 2000. Positive external factors include better prospects of more synchronised world growth expansion together with the spread of the internet via a smarter PC and mobile phone medium. These, along with favourable regional liquidity and corporate earnings trends in Asia, augur well for a continuation of its bull market.
"Barring risks such as higher than expected rate hikes by the Fed or a collapse in tech stocks worldwide, Asian markets will continue on their positive path. 'New Asia' sectors - technology and telecoms - are expected to lead. Good quality cyclical stocks, together with well-managed consumer-related companies, should perform well."
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