THE Asian equity markets including Malaysia are well poised to perform better next year given their current attractive low valuations, according to an international investment expert.
Asian markets will experience a choppy ride in the first half (of 2005) but are set to perform well in the remaining part of the year, said Prudential Asset Management (Hong Kong) Ltd head of investment services Robert Rountree said:
He said most Asian market valuations were still attractive compared with those of the US and European equity markets.
Most Asian domestic growth engines Singapore, Thailand, South Korea and Malaysia, for example are firing in anticipation of a sustained strong rise in exports next year, Hong Kong-based Rountree said in an interview in Kuala Lumpur yesterday.
He said despite worries that the slowdown in the US economy and the weak American dollar would adversely affect Asia's economic growth, countries in this region were in reality becoming increasingly less dependent on exports to the United States.
Fundamentally, he said, Asia's economic prospects looked good with political risk moderating, national and corporate balance sheets strengthening, government flexibility in using fiscal and monetary tools to support growth and domestic consumption remaining supportive.
Indeed, he said, the next capital investment cycle was round the corner for Asia with corporate profitability rising.
Rountree said although moves to upgrade the region's 2005 earnings expectations had stalled in several instances since May, there had been very little in the way of earnings downgrades.
Even if downgrades should occur, we suspect that they would prove short-lived given the medium-term outlook for Asias economies and realisation of the on-going benefits of corporate restructuring, he said.
The over-riding message one receives is that Asias equity markets are poised to resume their rise, added Rountree, who manages Prudential Asia Pacific's £20bil worth of mutual funds.
On fears that the weak US dollar might force a revaluation on regional currencies, he said: Personally, I would be surprised if regional central banks decide to undertake any revaluation next year because exports are looking good and regional currencies are still cheap.
However, if inflation pressure were to rise in the United States, that could really torpedo Asian market growth, he said.
Going forward, Rountree said Asian regional fund managers would be looking more at domestically-driven stocks as well as banks and financial services-related institutions.