Asia hot pick of investors in 2003

  • Business
  • Thursday, 16 Jan 2003

TOKYO: Global investors are playing it safe in Asian markets amid fears of a possible war in Iraq and tensions over North Korea’s nuclear programme, but they are seen ready to scoop up Asian technology stocks later this year. 

The region’s hot economic growth prospects, particularly in China and Thailand, are expected to deepen investor interest in the region’s stock markets, which have already been beneficiaries of foreign fund investment last year. 

Current top picks are banks, utilities, cyclicals, oil stocks – such as Chinese refiner PetroChina – and the Australian market. 

But investors are ready to buy the region’s technology stocks at the first signs of robust global demand for mobile phones and personal computers (PCs), spurring even more foreign investment into Asia-Pacific markets, according to analysts. 

“It is often the case that the high-tech sector works as a catalyst to draw money from abroad to stocks in the region,” said Takuya Shikatani, chief strategist of Asian stocks at Nomura Securities. “When their business is poor, the value of net inflow shrinks. But when their business is good, global investors feel at ease to invest in the region more.” 

Leading technology companies such as Samsung Electronics of South Korea and providers of outsourced chip manufacturing or foundry services such as Taiwan’s TSMC and UMC are favourites. 

“We are now underweight on technology issues in the region, but are ready to raise the weighting of these growth stocks up to 20% when the time is ripe,” said Takashi Inoue, assistant portfolio manager at Kokusai Asset Management here. 

Funds investing in the Asia-Pacific region excluding Japan or Australia saw a net injection of US$1.17bil in the first 11 months of last year, in contrast with a net outflow of US$932mil in 2001, according to Nomura International of Hong Kong. Their net buying was despite falls in the 2nd half of 2002 in several Asian markets, including Seoul and Taipei, due to a disappointing recovery in demand for information technology products following the sector’s worst-ever downturn in 2001. 

Investors generally liked the region’s economic growth prospects, analysts said. 

The Asian Development Bank in December revised down its forecast for developing Asia’s gross domestic product (GDP) growth for 2003 to 5.6%. Yet that is buoyant when compared with an official forecast of 0.6% growth in Japan for the year to March 2004 after an estimated 0.9% expansion this fiscal year. 

“Asia-Pacific ex-Japan markets are likely to continue to outperform their global counterparts (including Japan) on a relative basis in 2003,” said Khiem Do, head of Asian equities at Baring Asset Management in Hong Kong. “The Asia Pacific has stronger growth, liquidity, currency and valuation fundamentals than the rest of the world.” 

That’s why investors are likely to give Japan the cold shoulder in 2003, since deflation is a drag on the world’s 2nd largest economy, analysts say. 

Tokyo’s Nikkei average is expected to fall further in the coming months to around 20-year lows at 8,000, some 80% below its peak reached in late 1989, according to Japanese strategists. But a recent Reuters poll of 11 analysts forecast the market could end the year at 11,000 – up 30% from current levels – partly on cuts in taxes on dividends and capital gains. 

In Australia, strategists expect the benchmark S&P/ASX 200 index to rise 8% to 10% in 2003, clawing back lost ground after a horror year which saw a 12% loss despite strong economic conditions. – Reuters 

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