Asian stocks seen outperforming after another `annus horribilis'
Asian stocks seen outperforming after another `annus horribilis'
David Vujanovic, Agence France-Presse, Hong Kong
Asian bourses had another grim year in 2002, emulating global
stock markets amid the economic downturn, but the region is
expected to outshine the rest of the world next year despite
uncertainty.
Analysts were hoping for an upturn in Asian share prices this
time last year after the U.S.-led global slowdown in 2001
followed by the shockwaves of the Sept. 11 terrorist attacks on
New York and Washington.
But the recovery failed to materialize due to the weak U.S.
economic upturn as well as concerns about a possible double-dip
recession for the world's biggest economy.
That was exacerbated by U.S. corporate scandals and oil prices
shooting up ahead of an expected U.S.-Iraq war towards the end of
the year.
Stock markets tumbled as Asia's crucial export sector
struggled amid sluggish consumer spending in the U.S., its
biggest export destination.
The region's biggest market, Tokyo, hit a series of 19-year
lows and other major bourses in Hong Kong, Singapore and Taipei
shed 16-18 percent. However, some of the smaller Southeast Asian
markets surprisingly flourished amid the gloom.
With the U.S. economy expected to pick up next year, exporters
stand to gain from stronger orders. The U.S. economy is projected
to grow 2.6 percent in 2003 from 2.4 percent this year.
The mix of a U.S. turnaround and a fast growing China are seen
as the right ingredients to bolster regional economies, although
Japan shows little sign of emerging from its decade-long slumber.
"The year to 2002 proved to be another annus horribilis for
equity markets and a tough 12 months lie ahead, yet as a region
Asia is set to outperform and come end of 2003, Asia should trade
higher on the back of a clearer global picture," said Markus
Rosgen, ING Financial Markets' chief strategist for the region.
Japanese share prices hit a series of 19-year lows in the
second half of the year because of major problems with the
country's economy, as well as the global stock market downturn.
The Japanese economy continues to be crippled by deflation,
along with the large number of bad loans at banks whose plunging
share prices pulled down the rest of the market.
The key Nikkei-225 index lost about 20 percent after shedding
almost 24 percent last year. On November 14 it ended at 8,303.39,
its lowest close since March 25, 1983.
Hong Kong stocks were also hit by economic weakness and
deflation. The Hang Seng index fell about 16 percent after
dropping more than 24 percent in 2002.
"In the early part of the year, it was hoped that lower
interest rates and an economic recovery could help the market,"
said Kenny Tang, associate director of Tung Tai securities.
"However, the economy did not recover and deflation remained
and so for the whole year, the Hang Seng continued on a
downtrend."
Seoul and Bombay held firm but Sydney and Wellington could not
match their steady 2002 performance, losing about 10 and six
percent respectively.
The success stories of the year were limited to Southeast Asia
with Bangkok climbing about 15 percent, and Kuala Lumpur and
Jakarta both up about eight percent.
Looking ahead, ING Financial Markets said in a recent report
that it sees even further upside for the three Southeast Asian
bourses in 2003.
For the region as a whole, Howard Gorges, vice chairman of
South China Brokerage, said the threat of a U.S.-Iraq war was
still hanging over markets.
"Markets are more or less discounting war in the short term
but I don't think they are discounting a long delay in sorting
out the Iraq problem."
But despite the uncertainties, Lim Chung Chun, executive
chairman of Fundsupermart.com in Singapore, said Asian stocks now
offer better value than their U.S. and European counterparts.
According to Lim, Asia's important technology-related stocks
have hit a trough and are poised to bounce back next year, albeit
gradually.