HSBC asset management favors HK stocks in Asia

HSBC asset management favors HK stocks in Asia

Rita Raagas De Ramos, Dow Jones/Hong Kong

HSBC Asset Management is most bullish over Hong Kong shares in
Asia, the only market in the region where it is overweight, and
cautious over South Korea, Indonesia and India stocks.

"Market fundamentals (in Hong Kong) remain solid in 2005 with
major investment themes of reflationary pressure, rising property
prices, and booming retail and tourism," said Leon Goldfeld,
investment director at HSBC Asset Management, which manages
around US$210 billion globally.

Excess liquidity in the Hong Kong financial system should also
support the market over the long-term, Goldfeld added.

Hong Kong was among the most favored stock markets by
international fund managers surveyed by Dow Jones over the past
two weeks.

Local traders aren't as bullish over Hong Kong's stock market,
however, with many still suggesting investors remain cautious in
the absence of fresh impetus for gains. Many local traders say
the good news on the economic front has already been factored in
share prices.

Meanwhile, Goldfeld is cautious over stock markets in South
Korea, Indonesia and India, where HSBC Asset Management is
underweight.

South Korea's domestic consumption and construction spending
have yet to recover, Goldfeld said.

He added that South Korea's manufacturing sector is suffering
due to the margin squeeze from more expensive raw materials and
higher transportation costs.

South Korea's banking sector also has been in a slump due to
low interest rates and weak credit demand, he said.

Goldfeld believes that political and economic reforms
initiated by Indonesian President Susilo Bambang Yudhoyono will
help boost the country's growth.

However, he believes all those expectations have already been
priced in share prices.

Indonesia's Jakarta Stock Exchange Composite Index ended up 45
percent in 2004, making it the best performing stock market in
Asia last year.

"Valuations, although supported by decent earnings growth, are
at the top end," Goldfeld said.

Current valuations are also behind HSBC Asset Management's
underweight in India shares. Over the long-term, however,
Goldfeld expects a 15 percent-20 percent rise in earnings-per-
share growth in India in the fiscal year starting April 2006.

HSBC Asset Management is a unit of HSBC Holdings Plc. (HBC).