U.S. funds to seek Asian stocks, says J.P. Morgan

U.S. funds to seek Asian stocks, says J.P. Morgan

BANGKOK (Reuter): The much-awaited movement of U.S. funds to Asian bourses, as Wall Street's gains approach saturation point, may take place from the second half of 1996, a senior J.P. Morgan & Co Inc official said yesterday.

Among regional markets likely to benefit from such investment would be mainly those in Thailand, Malaysia and to a lesser extent in Indonesia and the Philippines, Ronald Dewhurst, the firm's managing director for Asia-Pacific equities business told Reuters in an interview.

"We could see some rotation of funds from the U.S. to Asia in the second half of this year. We are in a delicate stage now," he said.

Dewhurst noted that after the recent sustained upside in Wall Street, some U.S. investors were concerned that the market could correct, and were gauging bourses in Asia where they could diversify their investments to make good returns.

There was a brief spurt of American money into some Asian bourses last November and December, but that movement had abated for now, he said.

Recent China-Taiwan tension had made some U.S. investors cautious about dispatching fresh funds to emerging Asian markets. "There is a perception problem," he added.

Dewhurst said the tension had not sparked a big sell-off or repatriation of U.S. funds in some key Asian markets, but resulted in some profit-taking and investor inactivity.

J.P. Morgan manages a total of some US$180 billion in investor funds globally in a variety of financial sectors, Dewhurst said.

On the Thai stock market, he said it was one of the most attractive emerging markets in Asia and could be a major beneficiary of any rotation of U.S. funds in the future.

"Thailand stacks up attractively and I see it as a potential beneficiary of rotation by funds from the United States," he added.

Dewhurst said Thailand was not without problems because the country's widening current account deficit was a hot topic among foreign analysts.

In 1995, Thailand's current account deficit was 8.1 percent of gross domestic product and 42.0 billion baht higher than the central bank's projection of 335.7 billion baht. In 1994 the deficit was 203.3 billion baht.

Dewhurst said he was not unduly worried about the deficit. "Certain economic figures become the flavor of the day. The current account deficit is now the flavor. This country has made big advances in the past four to five years," he added.

On Malaysia, he said the Kuala Lumpur Stock Exchange was not that cheap to invest in, but like Thailand offered reasonably good volume and opportunities to make profits.

Markets in Indonesia and the Philippines offered good prospects for returns but they were small volume bourses and both lacked big market capitalization.

While the Tokyo bourses were sluggish, the Hong Kong market may not be a big recipient of U.S. funds as it was driven mainly by property and sentiment may be softened by the handover of the British colony to China in 1997, he said.

Dewhurst identified stocks in companies producing consumer goods, banks and financial institutions, some property firms and the resources and power generation sectors as good investment bets in emerging Asian markets.

He said too much had been banked on the Asian telecommunications sector in which there were too many players in the field busy raising capital, but also stiff competition.

"Clearly with strong GDP growth in Asian countries and increased consumer spending, consumer product makers would be beneficiaries of investment," he added.

"The sleeping sector, as I call it, are the power generation, oil exploration and resources sector. They are a part of an end- product. We will see big companies developing in this area in Asia," he said.