Equity markets in Korea and Taiwan have generated impressive performances amid what could be termed ...
Equity markets in Korea and Taiwan have generated impressive performances amid what could be termed a lacklustre investment environment. Korea and Taiwan generated returns of 29.7% and 17.9% respectively in sterling terms during November, according to the S&P/IFC Investable indices.
Buoyed by strong domestic demand, Korea's economy beat growth expectations during the third quarter. The outlook for Korea's banking system seems positive, reflecting the impetus of rapid bank loan growth, and the recent merger between Kookmin and H&CB should provide an example of successful unions within the sector.
Taiwan's economy is not as robust as that of Korea, but the news of its (and China's) accession to the WTO is of major significance. The countries will have to view each other as members of the same club.
There is evidence the factors that have led to constant downgrades in such growth-oriented markets have improved. For example, the huge build up of inventories, particularly in the IT hardware sector, has largely been dissipated and signs of a recovery in semiconductor prices are beginning to emerge ' both of which bode well for a strong rebound in top-line growth next year.
Given our belief in a strong recovery in the second half of 2002, following two years of extensive monetary and fiscal stimuli worldwide, Asian economies are likely to be early beneficiaries, reflecting their openness to trade.
We believe these factors should ensure these two 'tigers' will deliver positive earnings surprise in 2002.
Margaret Gadow is senior investment manager with the Pacific and Emerging Markets Team for Gartmore
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