Gary Potter, joint head of multimanager services at Credit Suisse Asset Management, thinks there are...
Gary Potter, joint head of multimanager services at Credit Suisse Asset Management, thinks there are two distinct markets in the Asia Pacific region: the North Asian markets linked with China (South Korea and Taiwan), and the South East Asian markets (Singapore, Malaysia, Philippines and Indonesia).
He says: 'This distinction has been amplified as global indices like the MSCI World show China and Taiwan are tied to growth in the global economy. Ten years ago this was not the case. There is less happening in the South East Asian economies. Some of these, like the Philippines and Indonesia, have huge consumer markets, but they do not impact on the world economy as China does.'
China has been the brake in Japan's recovery as it has taken the market share of the Japanese economy. An economic growth of 7% has been predicted for its economy this year. More foreign investment is expected to pour in the country as China becomes a formal member of the World Trade Organisation (WTO).
'In the future, the world economic situation will improve and as a result the tech sector will improve as well,' adds Potter. 'China might move towards more tech products. Hong Kong will also have a key role to play in the giant's growth, serving as its major financial centre.'
However, Neil Macquay, head of Asia Pacific (ex-Japan) equities for Scottish Widows, is not so optimistic on China's growth and points out that Hong Kong is doing badly.
Macquay says: 'China's trade cycle is slowing although foreign investment is holding up well and property has come off the boil. Hong Kong is experiencing an ongoing recession. Unemployment is up and the construction industry is laying people off.'
The Hong Kong government is planning to fight the recession with an injection of liquidity in the economy by sponsoring capital projects.
'The government is planning to increase capital expenditure and carry out infrastructural projects within the economy,' says Macquay.
'But there is a limit to countering the recession because property prices are falling and the government depends on the sales of property as a source of revenue. Moreover, with the Hong Kong dollar pegged to the US dollar, the economy does not have an immediate tool for quick fixes. Hong Kong will not get an awful lot weaker but will only pick up in the next half year.'
Macquay also believes the Asia Pacific region overall is beginning to show signs that the trough is over. He says: 'Markets are beginning to see trade cycles bottoming in the Asia Pacific region. On a monthly basis, figures show that exports to the US are picking up. Exports to the US were down 12% in November compared to 19% in October and 20% in September.'
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