Asia's Outlook For 2008

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Will we see a Christmas rally at end-2007?

What are the chances of a rally in Asian markets from now till the end of the year? We are very much taking our lead from the developed countries at this point. In the very short term if the rest of the world rallies, Asia will follow suit. Looking into next year, it is going to be more about strong Asian fundamentals but at this point, correlations are very high.


Outlook for financials in 2008

Financials have been under a lot of pressure, are we going to get more bad news as the year winds to a close? The news on Asian financials has been relatively mixed. We have had the Bank of China coming out with a fairly large exposure to subprime. We think that we have a good idea now about overall exposure to US subprime mortgages in Asia and the good news is that it's a very small percentage of assets. Obviously like everybody everywhere else in the world, we are trying to work out what the ultimate writedowns will be on those exposures. We think that there's still room for some disappointment in the short term but longer term in Asia, the problem is easily contained.


Outlook for Asia in 2008

Lately, Chinese officials have been getting lots of ear bashing from European politicians, central bankers, commissioners as well, they are not going to listen are they? They are going to do what they need to do for their markets, what does that mean for the Chinese stockmarket as we head into next year? That is absolutely right, I do not think the Chinese are going to bow to any external pressure; they are very much going to do what they think makes sense for the Chinese economy. Obviously with the undervalued currency, with real interest rates in China looking probably a little too low for the sort of blistering pace we've got in terms of growth in the Chinese economy, there needs to be some sort of adjustment in the currency, probably a modest increase in interest rates as well. So, the Chinese is likely to keep doing what they've been doing, slowly allowing the currency to appreciate against the basket of other currencies and slowly increasing interest rates.


What do you feel about the technology sector in Asia?

Technology from an Asian investor's point of view looks a little bit troublesome because of the large US exposure of Asian tech companies hence their underperformance now. There is a lot more focus on domestic growth, infrastructure, all of those really impressive structural drivers of Asian growth over the longer term and I see no real reason for that to change. Tech is likely to perform again in Asia when people start feeling more optimistic about where the US is heading.


As we move into 2008, what do you think is a safe theme or sector in Asia for investors?

It is still going to be about domestic growth. The cycle in Asia started in 2000 with a surge in exports that has really driven economies over the last 5 years. Going forward, it is really about Asia picking up in terms of domestic growth and this is where investors should focus their exposure.


Do you think commodities are still a strong global play right now?

Investment in infrastructure across Asia is booming at the moment. This is going to keep demand for commodities strong over the next few years. Less demand from the US is a short term risk but we believe that the medium and longer term demand for commodities from China and India will continue to outstrip supply.