{"id":342,"date":"2011-04-20T18:48:25","date_gmt":"2011-04-20T18:48:25","guid":{"rendered":"http:\/\/www.thebizsense.com\/views\/?p=342"},"modified":"2011-06-22T09:07:07","modified_gmt":"2011-06-22T09:07:07","slug":"buy-into-asia","status":"publish","type":"post","link":"https:\/\/www.thebizsense.com\/views\/investments\/buy-into-asia","title":{"rendered":"Why Its Time Again to Buy into Asia"},"content":{"rendered":"
\"Crisis<\/a>

Crisis provides Opportunities<\/p><\/div>\n

Crises offer the best opportunities for investors, although we need nerves of steel to seize those opportunities.<\/p>\n

You might have expected all the bad news from Japan and the Mideast to clobber Asian stock markets. But they have done nothing of the sort.<\/p>\n

After a moderate correction, the markets as a whole remain in an uptrend. The bourse you would expect to be hit the hardest, Japan, plunged immediately after the tsunami, but has already recovered half the ground lost and is now well above levels seen last year.China\u2019s share prices hardly winced, and remain in the rising trend that has made it Asia\u2019s best-performing market this year.<\/p>\n

Where do we go from here?<\/p>\n

There are certainly some strong reasons for being very cautious about Asian stocks for the next few months:<\/p>\n

\u2022 Wall Street, which usually leads global markets, has lost its upside momentum, in a trend that may develop into something worse than a short-term correction.
\nIt could be signalling the onset of a slowdown in the US economy as it responds to negative factors such as the fading impact of fiscal stimulus, deteriorating conditions in real estate markets, and persistent failure to create the jobs that would fuel rising personal incomes.
\nThe prosperity of Asian economies remains sensitive to the strength of their export markets, particularly the US.<\/p>\n

\u2022 China continues to keep its banking system under pressure to combat inflation and curb property speculation.
\nThe next 12 months will be a key period in the five-yearly \u201cchanging of the guard\u201d of bureaucrats who run the country. Newly-nominated officials will start to have a conservative influence on policymaking, and can be expected to clamp down on inherited excesses once they take power in March next year.<\/p>\n

\u2022 Japan will take some time to recover from the devastation of the tsunami. In addition to the burden of reconstruction, there will be the need to replace destroyed power-generating capacity. Many businesses have suffered costly disruptions and have to rebuild production lines. There is the continuing problem of a too-strong yen.<\/p>\n

\u2022 The poorer countries in the region, being particularly sensitive to higher prices of foodstuffs and fuel, which account for a major part of consumers\u2019 expenses, have to combat inflation by keeping interest rates high, or raise them.
\nEquity markets don\u2019t mind inflation, but they are spooked by the austerity policies that governments apply to fight inflation.<\/p>\n

In the emerging economies, policymakers won\u2019t ease up on their squeeze until the prices of foodstuffs and fuel have fallen considerably and are continuing to trend downwards.
\nAgainst those negatives, we have to balance the positive factors\u2026<\/p>\n

\u2022 If the feared \u201cdouble dip\u201d in the US economy becomes a reality, policymakers will react aggressively to counter it. At the very least, the Fed will forget about its promised cessation of quantitative easing. Notwithstanding all the talk about fiscal restraint, the politicians will once again do what they always do when the pressure is on \u2013 find ways to maintain hugely excessive, underfunded public spending.<\/p>\n

Although American consumers won\u2019t return to the debt-funded splurge of the past, they won\u2019t stop spending. Personal savings rates have already been restored. They may still be way below the levels needed to address fundamental problems such as the looming burden of pensions and healthcare, but they are probably not going to go up much more, unless (until?) there is another financial crisis that shocks consumers into greater thrift.<\/p>\n

Consumer caution and the impact of a weaker dollar will combine to restrain growth in US imports, but Americans will remain addicted to low-cost supplies from abroad. There will continue to be exciting new products such as iPads, largely made in Asian factories. And American corporations will maintain their aggressive focus on underpinning and boosting their earnings through cost-cutting, much of it based on outsourcing overseas.<\/p>\n

Asian exporters may not see strong growth in their foreign markets \u2013 but those markets aren\u2019t going to collapse. And domestic demand inside Asian nations will continue to expand relatively strongly in line with continuing good rates of economic growth.<\/p>\n

\"\"<\/a>\u2022 While continuing to combat excesses, Chinese policymakers won\u2019t risk squeezing too hard. The need to continue maintaining high economic growth \u2013 averaging at least 7 per cent a year in real terms \u2013 will outweigh the need for restraint.<\/p>\n

Inflationary pressures in China are likely to flatten out, and then to start easing, within a few months.<\/p>\n

The relative strength in Chinese equities suggests that investors are starting to return to the market in expectation of a renewed upsurge.<\/p>\n

\u2022 The pressures of short-term factors that have been driving up international prices of many agricultural commodities are likely to ease. In any case, the most important foodstuff in Asia, rice, has been spared. The probability is that food price inflation, the major source of consumer inflation in emerging economies, will soon begin to fade.<\/p>\n

The second most important source of worry \u2013 the oil price \u2013 is more difficult to predict, given the disruptive impact of the Libyan crisis on global supplies. But the probability is that we have already passed the peak in pricing pressures. So far the crisis doesn\u2019t seem to have done much more than use up some of the surplus in global capacity. And any cooling in commodity prices generally will ease the pressure from speculative buying.<\/p>\n

The principal alternative to oil, natural gas, remains cheap and in abundant supply.<\/p>\n

\u2022 Although the tsunami has been a human disaster for the Japanese, the consequent rebuilding will provide a major economic stimulus.<\/p>\n

It is important not to confuse a loss of wealth \u2013 in real estate, factories and human capital \u2013 with the very much smaller loss in Japan\u2019s annual production.<\/p>\n

The Japanese economy remains a global giant in its size, sophistication, advanced technologies, and the skills and hard work of its people. Its recovery is likely to surprise on the upside.<\/p>\n

more to follow – Chinese shares likely to lead the next upsurge<\/p>\n

CopyRight \u2013 OnTarget April 2011 by Martin Spring<\/p>\n","protected":false},"excerpt":{"rendered":"

Crises offer the best opportunities for investors, although we need nerves of steel to seize those opportunities. You might have expected all the bad news from Japan and the Mideast to clobber Asian stock markets. But they have done nothing of the sort. After a moderate correction, the markets as a whole remain in an uptrend. The bourse you would expect to be hit the hardest, Japan, plunged immediately after the tsunami, but has already recovered half the ground lost and is now well above levels seen last year.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"amazonpipp_noncename":"","amazon-product-isactive":"","amazon-product-single-asin":"","amazon-product-content-location":"","amazon-product-content-hook-override":"2","amazon-product-excerpt-hook-override":"3","amazon-product-singular-only":"","amazon-product-amazon-desc":"","amazon-product-show-gallery":"","amazon-product-show-features":"","amazon-product-newwindow":"2","amazon-product-show-list-price":"","amazon-product-show-used-price":"","amazon-product-show-saved-amt":"","amazon-product-timestamp":"","amazon-product-new-title":"","amazon-product-use-cartURL":"","amazon_featured_post_meta_key":"","_amazon_featured_alt":"","amazon-product-template":"","footnotes":""},"categories":[8,3,9,74],"tags":[32,30,5,97],"class_list":["post-342","post","type-post","status-publish","format-standard","hentry","category-featured","category-investments","category-news","category-predictions","tag-asia","tag-crisis","tag-investment","tag-opportunities"],"yoast_head":"Why Its Time Again to Buy into Asia - TheBizSense Views<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.thebizsense.com\/views\/investments\/buy-into-asia\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Its Time Again to Buy into Asia - TheBizSense Views\" \/>\n<meta property=\"og:description\" content=\"Crises offer the best opportunities for investors, although we need nerves of steel to seize those opportunities. 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