Asia Goes Into Easing Mode, What This Means For Risky Assets
Raymond Chan Chief Investment Officer, Asia Pacific, RCM, shares his outlook for Asia 2012
Asia in 2012 will be a better performer than Asia in 2011 because 1) US is showing reasonable growth, 2) Europe is starting to get a grasp of the debt crisis, which lends stability to the region and 3) inflation has started to slow in Asia, particularly in China. Asia in easing mode will be positive for risky assets, such as equities.
Risk markets have discounted a lot of bad news, and there should be increasing news that is less negative, which will help liquidity flow back into the markets.
While some companies have reported disappointing earnings, their share prices have gone up and this suggests markets have already discounted too much bad news into prices.
Potential risks are 1) deterioration of the Euro debt crisis, 2) European banks, which have funded much of Asia's growth, are undergoing a deleveraging process and local Asian banks must step in, otherwise growth in Asia could slow.
Asian financials have loan debt ratios of 80%, and are able to step in as European banks exit.
The question is whether they are willing.. North Asian markets are expected to outperform ASEAN markets, and China-H or China-A shares are currently very attractive from a valuations standpoint.
Korea is another market where corporates are showing strong balance sheets, and this lends further support to the view that Noth Asia will outperform ASEAN markets.
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