Far East Markets - Taiwan, Korea, Hong Kong, China and India Message Board

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Strategies & Market Trends : Far East Markets - Taiwan, Korea, Hong Kong, China and India

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To: Sam Citron who wrote (12)	4/10/2005 8:05:51 PM
From: BigSwingingD	of 30

Personally I do not believe the tensions with Japan to play a significant role in the drop pf the KOSPI...Chest-thumping between two of the more politically stable countries in east asia does not seem to be reason enough. I think it goes down to a more fundamental level. Asian markets are caught between a rock and a hard place. If global growth surprises on the upside this year, rates must rise further - which would be bad for equities especially in the liquidity driven Asian markets. But if growth disappoints, that would be negative too, especially for economies dependent on exports. At worst, both could happen at the same time. Whichever way, foreign investors realise the next 6 months are hardly the right point in the cycle to bet heavily on Asia-Pacific equities..... Long term however I am far more optimistic. Most Asian countries face ageing populations over the next 30-40 years. In Korea, demographic problems are worse than the better known cases in Europe. No country in Asia currently has a well-designed penison system, but governments are finally starting to do something about this. Korea and Taiwan are both introducing radical pension reforms shifting from a defined benefit to a defined contribution scheme. This should provide impetus to the markets over the next few years.... Also with most big institutions in Asia government run, they tend to invest conservatively in cash or government bonds. However governments increasingly understand that by investing in equities long-term returns will improve. For example, Korea National Pension Fund will increase allocation to equities and foreign securities from 10% to 22% over the next 5 years...The equity ceiling of China's National Social Security Fund has risen from 5% to 25% - and will eventually rise to 40%.

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