Asian equities attractive despite recent form

Despite the volatility of recent weeks, Asian equities remain an attractive asset class. Unlike 1997, sovereign balance sheets are strong, and central banks now have the firepower to smooth out short-term financial flows. The correlation between the US and the smaller Asian markets has picked up in recent weeks, and this has offered the impression of crisis. However, nothing could be further from the truth. In our view, the underlying economic picture remains relatively unchanged from the end of 2006, while risk appetite has fallen back towards historical averages. There is likely to be fur...