The Far East ex Japan countries continue their recovery and global growth remains steady, providing o...
Semi-conductor manufacture is still the major force in Taiwan and Korea, but telecoms are becoming a point of investor interest throughout the region.
Mary Whitehead, pension fund manager for Clerical Medical, has a prima facie reason to avoid all but the main markets, partly because of the limitations imposed by the size of her fund.
She says: "It is a combination of issues of liquidity and basic strengths and potential. There are better opportunities in Hong Kong and Australasia."
From the start of the year to 5 June, there has been a big disparity in country performance in the region. The top performers in the FT Pacific ex Japan Index were Australia at -3.9% and Hong Kong at -5.2%.
At the other end of the scale, Indonesia dropped 47%. The difference in performance between countries in the last few months makes the choice of country weightings a vital one, according to Whitehead.
Of the Asian countries outside Japan, Hong Kong still offers the most stable and well-regulated market. It also gives access to Chinese stocks, some of which have an impressive potential for growth.
Whitehead says: "After a difficult period there are more positive economic signs in Hong Kong. We are seeing some signs of better GDP figures. We are clearly seeing Hong Kong lead in the New Economy sector."
Kevin Bennett, head of investment strategy at Chiswell Associates, has noted a broadening out of the Hong Kong market since the Chinese takeover. The property sector was the undisputed king of the market, but the situation is getting less one-sided as industrial Chinese stocks enter non-industrial Hong Kong's exchanges.
The pegged currency has both fans and detractors. Whitehead is positive on the stability this state of affairs offers, but Bennett points out a potential problem - the fact the currency is pegged means US interest rate changes tend to be mirrored by Hong Kong.
He says: "Hong Kong is in a period of recovery, while the Fed is attempting a controlled US slowdown. Until US rates peak, this will potentially put a damper on the Hong Kong economy."
Malaysia, which has recently dropped the capital controls it imposed, has rejoined the local MSCI Index, bringing with it a degree of investor interest. But there is a perceived risk that the authorities could impose capital controls once again for the sake of short-term political expediency and this is keeping investors cautious.
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