Dollar weakness a bonanza for Asia, says brokerage

Dollar weakness a bonanza for Asia, says brokerage

Agence France-Presse, Hong Kong

ING Financial Markets said Thursday that Hong Kong, China,
Malaysia, Indonesia and Thailand are poised to generate robust
investor returns due to ongoing weakness in the U.S. dollar.

The Dutch brokerage said in a report that a low U.S. dollar
would boost the performance of both Asian economies and stock
markets in the second half of the year, given the fact that
several local currencies are either pegged to the U.S. dollar or
closely shadowing its performance.

It forecast the U.S. dollar to reach a low of 1.20 euros by
the end of 2004.

"A weaker U.S. dollar means weaker Asian currencies, which
makes Asian economies more price competitive in global trade,"
ING said.

"Furthermore, as the United States is the largest buyer of
Asian exports, U.S. import prices will rise as the U.S. dollar
continues to weaken, in turn triggering rises in Asian export
prices and increasing the U.S. dollar value of global trade," it
said.

BTo support its argument, it cited Hong Kong, where import
prices have risen 0.3 percent year-on-year against a 5.0 percent
decline year-on-year in February 2002.

Asian export prices in January-March were also up 2.0 percent
year-on-year.

The brokerage said it expects Asian countries with the highest
percentage of service companies will be the biggest beneficiaries
of this "deflation" phenomenon.

It said markets in Hong Kong, China, Malaysia, Indonesia and
Thailand were expected to be the strongest performers under this
scenario with banks, conglomerates, consumer stocks and property,
seen as the best equity investment.

"We predict that by the end of 2003, Asian markets will be up
17 percent from current levels," said Markus Rosgen, ING
Financial Markets chief strategist.

"In the very near future, markets will consolidate as we come
to the end of the post-Iraq war rally, and could surrender as
much as 50 percent of their recent gains," he said.

"However, that will be temporary, and investors should treat
this as a buying opportunity.

"In the long-term Asia's stock market performance is set to
diverge from the market behavior in Europe and the U.S.," Rosgen
said.

"While these markets will continue to be plagued by slow
growth and sluggish markets, Asia will be propelled by the
increasing competitiveness and the growing inflation that a weak
U.S. dollar provides."