U.S. analysts still upbeat on Asia
U.S. analysts still upbeat on Asia
NEW YORK (Reuter): The "Year of the Rat" has turned out to be
not so fat for Asian economies.
For the first time in a decade, a slowdown in exports raised
doubts that the Asian tigers might be losing their economic
prowess.
Compared with the first half of 1995, exports fell in China,
and the growth rate notably flattened in four tiger economies --
Singapore, Hong Kong, Taiwan and South Korea -- as well as in
Malaysia, Indonesia and Thailand.
At the same time, Latin American countries are pulling out of
recession to post impressive year-on-year growth. Mexico stunned
the market with a 7.2-percent rise in Gross Domestic Product
(GDP) for the second quarter.
So, has the wheel of fortune turned?
Pessimism about Asia is premature, U.S. economists and money
managers say. Even with growth rates moderating, Asia still
stands head and shoulders above other world regions. Given a
history of boom-and-bust cycles in the Latin American economies,
the current recovery could be ephemeral, they say.
As long as Asians continue to squirrel away a hefty chunk of
their income, U.S. investors will keep Asia ahead of other
emerging markets in their long-term strategies.
Investment
Asia provides a textbook case of savings and investments,
argues John Praveen, international economist at Merrill Lynch.
"Higher savings lead to higher domestic investments; that, in
turn, boosts GDP growth and attracts foreign investments."
Asian countries with an average savings rate above 30 percent
are the biggest savers in the world. Between 1990 and 1995,
Singapore residents saved around 48 percent, Koreans 36 percent,
Chinese 39 percent and residents of Hong Kong 35 percent, he
said.
According to International Monetary Fund (IMF) data, Asia is
the only region in the emerging markets whose savings and
investment rates as a percentage of GDP continued rising, Praveen
said.
Because of the sound economic fundamentals, Asia received half
of the US$207.4 billion in capital flows to the emerging markets
in 1994. Latin America got a quarter, Praveen said.
With the trends of high savings and investments in place, Asia
will lead the world in economic growth into the next century, he
said.
For the next decade (1995-2005), the World Bank projects a
7.9-percent annual growth rate for East Asian countries, 5.4
percent for South Asian countries and 3.8 percent for Latin
America.
Uncertainty
Ismail Dalla, president of Washington Asset Management, Inc,
said the high level of savings and domestic investments provides
a cushion for the impact of a cyclical slowdown, political
uncertainty and currency swings.
The current export slowdown was brought on in part by the
global glut of electronic goods and a collapse of semi-conductor
prices, he said.
The countries that have moved up the value chain from sewing
T-shirts to making computers became vulnerable to the whims of
the markets in the industrialized world, he said.
South Korea, Singapore, and to a lesser extent, Taiwan,
Thailand and Malaysia, were hard hit by the glut.
The adaptability of those economies to world market demand,
however, will get them over this trough.
Recent political unrest in Indonesia and speculative attacks
on the Thai baht have not triggered disinvestment or affected the
ability of either country to finance their current account
deficit, he said.
Current account deficits in the two countries result from the
influx of huge foreign capital investments, whose reduction takes
time as new export goods roll off the assembly line, Dalla said.
Asian countries also have large reserves to defend their
currencies, he added.