Asian investors looking for better year
Asian investors looking for better year
HONG KONG (AFP): Long-suffering Asian share investors may finally find something to smile about in 2001 although the year could get off to a rocky start, analysts said.
Most Asian investors will be glad to see the back of 2000. With the region growing strong after the Asian financial crisis of 1997 and 1998 they expected better.
Except for Australia and the world's top performing Shanghai B share market, major bourses in the region tumbled anywhere between 10 and 50 percent in 2000 at a time of strong economic growth.
But the economic growth had been more than factored in during 1999's rally. This year the bursting of the tech stock bubble, rising US interest rates and a souring Wall Street, as well as a host of domestic factors, all conspired to sink Asian shares.
Looking ahead, the dimmer prospects for IT companies show no sign of a speedy turnaround, Japan's economic recovery is as tenuous as ever and the debate over whether the US is headed for a soft or hard economic landing continues. So what gives Asian markets hope for a better year in 2001?
Interest rates are the major reason. Lower US interest rates -- expected early in 2001 -- offer hope of a better performance by Wall Street and indirectly for Asian markets.
Furthermore, most market watchers are expecting a soft landing for the US economy, which should ensure continued growth -- albeit at a slower rate -- for Asian economies.
ING Barings is predicting a 24 percent return from Asia markets in 2001, led by returns of 36.4 percent in South Korea and 36.3 percent in Taiwan, two of the most depressed market this year.
"Asian markets will reward investors with high double digit returns in 2001, as markets respond positively to a drop in US interest rates, and regional growth expands," ING Barings chief stratagist for Asia Markus Rosgen said.
"We have to keep watching prices on Wall Street next year but moves are likely to be moderate on expectations that the US economy will achieve a soft landing," Nikko Securities senior market analyst in Tokyo Hiroichi Nishi said.
"Share prices are expected to trade in a limited range early next year but chances are high that the Tokyo stock market could enjoy some recovery towards the end of next year," he said.
Hong Kong sank more than 10 percent this year but 2001 will be a different story, according to OCBC Securities director Peter Lai, who sees the index testing the 18,000 level in the first quarter.
Salomon Smith Barney is not quite so bullish but sees the Hang Seng hitting 17,500 within 12 months.
Lai cited US interest rate cuts of between quarter and a half percentage point and China's entry into the World Trade Organization as factors that would propel Hong Kong stocks.
Australian shares stood out for holding their ground in 2000 but nevertheless, some gains in the New Year are likely, Merrill Lynch Australasia research head Michael Brown said.
"We could see a strong rally in the market if investors think the Fed might ease sooner rather than later, or if they agree with our view that the drivers of top-line (revenue) growth and the structure of corporate profits remain healthy," he said.
Another important regional market, Singapore, could also be poised for a rebound, partly because it stands out for its record of economic and corporate restructuring, an analyst at a regional brokerage said.
South Korean shares plummeted about 50 percent this year but not all share ING Barings' optimism for the coming year.
"Prospects for 2001 are dim as South Korea's economic growth is forecast to slow further. There will be a technical rebound but even this depends on the process of economic reforms," said Shin Yong-Kyu of Daeshin Securities.
Constipated banking systems remain a central problem in many regional countries, especially Thailand, South Korea and Indonesia where mountains of bad loans are holding up a full return to health.
"Unless the non-performing loans are proactively attacked, the banking sector will not lend and no one will invest in banks or any other companies as firms won't be able to raise capital," Turn Key Management managing director Scott Niven said of the Bangkok market.
Thailand also has to go through the uncertainty of a general election in January.
Political turmoil in Indonesia shows no sign of settling down early in the new year, although the lessening of pressure on the rupiah as the US dollar's strength wanes offers a glimmer of hope, dealers said.
Recent moves to slash transaction costs for Shanghai B-shares and to set up an electronic trading system should help to ensure further gains for this years stellar performer -- share prices more than doubled in 2000 -- dealers said.