Foreign investment wave seen in Asia
Foreign investment wave seen in Asia
BANGKOK (Reuter): Two economists yesterday forecast a big new wave of foreign investment funds into east and south east Asia over the next 12 months that would lift the region's current sluggish stock markets.
Kenneth Courtis, chief economist of Deutsche Bank Capital Markets (Asia) Ltd, said Japan's near zero interest rates would squeeze funds out of the country into the rest of Asia in 1996 as Japanese companies struggle with a bad debt crisis.
He and his Bangkok Bank Plc counterpart, Nimit Nontapunthawat, told an economic forum that Thailand, Malaysia and Indonesia would be main beneficiaries of fresh direct investment from Japan and European firms.
Courtis also said he expects the dollar to appreciate to 110- 112 yen over the next 10-12 months from 101-102 now.
The economist said he sees a downward trend for short-term European and U.S. interest rates next year as static European economies become more pronounced and Washington tries to keep the U.S. economy robust during a presidential election year.
Courtis said 1995 saw a previous correlation of stock prices in the U.S. and emerging Asian markets broken.
"I think Asian stocks will outperform the rest of the world in 1996 just as they have underperformed in 1995," he said.
Nimit of Bangkok Bank said that a still relatively strong yen will force Japan to further relocate its support industries to south east Asia.
Problems
He said Thailand, Malaysia and Indonesia share problems of high inflation and current account deficits but their high growth economies could easily help them ride out bumps.
"The three countries may differ in details but not in substance," he said.
Gross domestic products of Thailand, Malaysia and Indonesia are projected to expand 8.6 percent, 9.0-10.0 percent and 7.8 percent, respectively.
Nimit said although he expects the Thai current account deficit to widen to a six-year high of 7.8 percent of GDP in 1996 from a projected 7.5 percent this year, its position remains strong and healthy.
Thai central bank officials said earlier about 79 percent of Thai imports, which rose nearly 30 percent this year, were capital goods and raw materials that would help boost Thai export competitiveness.
Nimit said he expects Thai machinery and equipment imports to rise a healthy 18.5 percent next year, a figure he described as "very impressive and healthy for the economy."
He said the main cornerstone of Thailand's growth is its exports which have expanded 25-30 percent annually for nearly a decade.
"Total Thai exports double in size every three to four years, and they are now bigger than those of India which has a much larger population," he said.
He said Singapore, Malaysia and Thailand are quickly going hi- tech with their electronic industries accounting, respectively, for 70, 50, and 25 percent of their overall exports.
Nimit said the worsening Thai current account deficit could be attributed to increased foreign exchange spending by a sharply higher number of middle class Thais making holiday trips abroad.
He said Thailand's foreign currency reserves have also been drained by a lack of its own commercial shipping fleet. Only five to seven percent of Thai imports and exports are carried by Thai ships.