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To: Bucky Katt who wrote (11729)	4/23/2003 10:14:13 PM
From: ACAN	Respond to of 48461

Sars and the Asian economy; Investors caught between SARS risk and opportunity HONG KONG: Asian investor sentiment has soured with the spread of the Severe Acute Respiratory Syndrome (SARS) virus, sending portfolio managers scurrying to cash despite cheap stocks across the region. “Asia is cheap but I don't think that is a catalyst to buy when sentiment is so weak,” said Khiem Do, head of Asian equities at Baring Asset Management (Asia) Ltd. Indeed, investors are trapped between the downside risks posed by SARS and the opportunity to buy cheap stocks. Many regional airline, property, banking, tourism and retail stocks have been hit hard by the outbreak of the disease, but Asian stocks are still trading at near all-time lows and offer investors some of the highest dividend yields in the world. J.P. Morgan estimates that Asia-Pacific markets outside Japan will trade at a price–earnings ratio of 12.3 times in 2003 against 17 times of the US and 15.4 times of the European markets. But instead of selling the value story, investment banks are slashing regional growth forecasts and revising down earnings estimates as governments from Singapore to Hong Kong grapple with the spread of SARS. “Clearly, SARS has complicated matters since Asia was supposed to be the growth engine of the world this year,” said Raymond Foo, regional strategist at BNP Paribas Peregrine Securities. ING Financial Markets, which is overweight on financials, real estate and technology, said it had lowered its estimate of 2003 regional earnings growth to between 6% and 8% from 12.8% because of the impact of SARS. Such pessimism has cast a pall over Asia and many analysts are now wondering if the region's stock markets can outperform their US and European counterparts, as they did in the past few years. The benchmark Morgan Stanley Capital International (MSCI) Asia Pacific Free ex-Japan Index has under-performed global benchmark indices, losing about 4.6% so far this year against a 3.6% gain on the Standard & Poor's 500 index and a 0.6% drop on the FTSE 100 index. Adrian Mowat, Asian strategist at J.P. Morgan Securities, said Asia appeared to be losing its relative economic momentum just as confidence in a US recovery was increasing. “We need to see the economic and earnings downgrades feeding through before Asia starts to recover its relative performance,” Mowat said. “One advantage of SARS is that it allows analysts to dramatically reduce numbers while saving face.” Analysts say Asia's cheap valuations, high dividend yields and flush liquidity, combined with the end of the Iraq war and an expected pick-up in regional exports, should provide a backdrop for stocks to bounce back if the spread of SARS is contained. J.P. Morgan says the prospective dividend yield for Asia-Pacific markets outside Japan could reach 4% in 2003 versus 2.2% in the US and 3.4% in Europe. And fund managers say once SARS starts to fade, investors are going to focus on market fundamentals and that is when Asia's strengths are going to stand out. – Reuters Allan