Merill Lynch upbeat on Asia

Merill Lynch upbeat on Asia

KUALA LUMPUR (AFP): Asian stock markets are likely to perform better in 1995, international brokerage Merrill Lynch predicted yesterday, saying that after China and India, Indonesia could emerge as the next favorite.

Uncertainty in global and other Asian markets could also benefit Singapore, which is likely to gain from broad-based earnings growth in banking, ship-repair, airlines, hotels, office property and retail next year, it said.

The forecast was done against a projected growth of 7.0-to-7.5 percent for the 10 major Asian economies, not counting Japan, in 1995 and 1996, from 7.7 percent in 1994.

Merrill Lynch said in its Asian economics strategy report released at a national economic outlook conference that slower growth in China's economy should be offset by continuing buoyant expansion in Southeast Asia.

"If investment flows are any indication, Indonesia could well emerge the region's strongest economy in 1995," it predicted.

For its 1995 Asian market strategy, Merrill Lynch has rated as positive Singapore, Malaysia, Indonesia and Thailand, negative for Hong Kong and Taiwan and neutral for South Korea and the Philippines.

In the next 12-to-18 months, property-related earnings should do well in Malaysia, while financial sector liberalization could provide a third engine of growth for Singapore's economy, Merrill Lynch said.

In South Korea, margin expansion should see continuing strong earnings growth next year, while India's structural reforms are expected to start yielding tangible growth.

In terms of economic fundamentals, it rated as above average the markets of Singapore, Malaysia and Thailand, average for India, Indonesia, South Korea, the Philippines, but a below average for Hong Kong and Taiwan.

Merrill Lynch said property prices were a major unknown in Hong Kong, and earnings were slowing in at least two sectors: banking and property development.

"The run-up to 1997 could produce more political wranglings with Beijing," it said.

For Taiwan, it noted that although a breakthrough in mainland China policies could act as a key market catalyst in 1995, growth prospects would remain unexciting in the near term.

But the downside risks could include a sharper-than-expected rise in U.S. interest rates, it said.