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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (4037)	1/1/2005 7:13:54 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

Asian equities expected to deliver 20 percent returns in 2005: analysts By Roland Lim, Channel NewsAsia's Hong Kong correspondent HONG KONG: Expect Asian equities to deliver healthy returns in 2005. The region as a whole should see stocks rise by 15% to 20%, says a poll of financial research houses. However the bulk of the gains is expected in the second half of the year amidst concerns over a declining US dollar and a slowdown in the global economy. 2004 was a year during which crude oil prices hit over US$50 per barrel, and the US dollar touched lows not seen in recent years against other majors. It was also a year during which cautious corporate America held back on demand and output, while the Chinese authorities steered their red-hot economy towards a soft-landing. Tony Dolphin, director at Henderson Global Investors, said: "The impact of the tax cuts has faded, the support from public spending is less, interest rates in the UK and the US have gone up, and the Chinese authorities are trying to slow their economy down. In addition, there'll be a bit of a drag from higher oil prices too." Put all that together and it doesn't exactly paint a very rosy picture for equities in 2005. As we enter the new year, Asian markets appear to be enjoying a liquidity-fuelled rally and while that's expected to continue until the Lunar New Year, analysts say expect a sell-off after that. Eddie Wong, chief Asian strategist at ABN Amro, said: "What we're talking about is a global downturn. So obviously, there's not a lot of absolute returns in the region. But on a relative basis, the domestic-oriented markets will perform much better. That, basically are Hong Kong, ASEAN and the global cyclical markets. Noticeably Korea and Taiwan could underperform quite substantially and China could underperform because it's exposed a lot to commodity prices and over-investment situation." But then again, there are different ideas as to which stocks to buy. Enzio von Pfeil, CEO of Commercial Economics Asia, said: "On the China-Hong Kong-Macau related plays, if one wants to be in equities next year, that's where you want to be. You don't want to be in other places where growth is going to be very slow, like the US, Europe and the rest of Asia, because if growth slows, how can earnings rise?" The biggest saving grace for 2005 is however expected to be a strong domestic consumption story, as exports will be hampered by strengthening regional currencies. Expect China to head the pack with 8% growth. It appears that Asia will fall into two camps: one that is domestically driven such as Hong Kong and ASEAN countries against the market cyclicals like Korea and Taiwan. ABN Amro advises investors to avoid high-beta stocks, speculative small-cap stocks and bet on banks, real estate and consumer plays in Hong Kong and ASEAN. Eddie Wong said: "The single most important call at this moment in time is when the global growth will start to roll over. If the global economy turns out to be very robust indeed in 2005, then our call will become wrong. But as I said, all the traditional wisdom is sending out very clear warning signals." And while a weak US dollar may be positive for Asian domestic demand, it is a double-edged sword. Asian central banks are becoming reluctant to buy US Treasuries, leading to a rise of US bond yields and further dollar weakness. And that is unlikely to leave Asia unscathed. - CNA channelnewsasia.com