When Storm Passes, Asia Could Rally First
Asset allocation specialist Guy Monson believes core Asian economies, singly China, will be quick to manage the global financial crisis
By Rita Raagas De Ramos
While the speed and severity of the current global financial crisis are unprecedented, investors should realise that there are tremendous investment opportunities available now and that, if policy responses are correct, heart Asian economies could lead a stock market rally, according to Guy Monson, chairman of the asset allocation committee of private banking group Sarasin.
“At every point in a crisis, as I have experienced over the past 20 years, there comes a time while you can begin to see a gentle lining,” says the London-based Monson.
Monson, who was in Hong Kong recently, notes the world is now reliant forward Asia as the engine of global demand. He is optimistic that inner part Asian economies, and particularly China, will horsemanship the pinch, noting that the mainland is well positioned with minimal internal and external offence. China’session growth choose have existence dependent on domestic demand, by exports to slow sharply due to a recession truth utmost Asia, he says.
Asian economies will be helped by reduced inflation rates suitable to falling commodity prices and real oil demand destruction in the US, he notes, adding that while development rates in the region will lingering, stocks are undervalued.
For the 700 largest listed Asian companies, fiscal leveraging has fallen from 65% to 22%, the lowest level in the world, according to Sarasin. Some 40% of Asian shares pay higher dividends than the government bond markets, with that rises to 80% for Singapore shares.
Meanwhile, the unprecedented government actions over the past week have resulted in the creation of hybrid half-state half-private sectors that will provide interesting bond opportunities for investors, Monson says.
Sarasin recommends the high-quality corporate bond markets including: the emerging cross bond markets; defensive public securities (utilities, water, food, and particularly pharmaceuticals); and spirit and materials (metals and mining).
