An Asian snapshot

Stephanie Cao, head of investments at the London branch of Nedcor Retail Investments, looks at Asia as an investment opportunity.

Japan

A unique opportunity here, and 2003 saw a large rebound, with PE rebounding more than 30%. But is it a false rebound? Cao says not. Foreigners were the net buyers on the local equity market, last year, based mainly on the local institutions selling cross-held shares.

There is still some residual local pension fund selling, although the levels will come down.

China

Moved to the centre stage lately - a fantastic economic story. The last two years are a prime example. The main concern is whether they can sustain their growth.

Still bullish. Foreign reserves continue to climb. National treasury has been an aggressive purchaser of US government bonds. The trend has changed slightly, with some net selling starting to happen.

Concerns: CPI or inflation and whether there is any overheating, driven mostly by volatile food pricing. The bank is aiming for a 5% target range.

The systemic risk is the potential for a banking crisis - the importance of the level of non performing loans cannot be under-estimated. There is a gentle downward trend.

While the urbanisation trend continues, pushed by government policy driving people to the coastal regions, rural China accounts for 900m people.

Cao is expecting a gdp growth rate of around 9%, while government tax collection improves in leaps and bounds.

There are also an increasing number of industrial enterprises as government is on a privatisation drive. WTO membership is also forcing companies to become more competitive.

China generally has a high savings level, and the government is attempting to stimulate spending. Consumer debt is encouraged in China, and credit cards are starting to emerge.

Hong Kong

Sentiment and confidence is back, following SARS crisis. Hang Seng is back - Valuation is still strong. The property market is a prime indicator of the area. Property developers market has shown a 30% growth, but still low, compared to earlier years, post the Asian crisis.

CPI and inflation are not an issue. There is some inflation, in the positive area - estimated at about 1.5% predicted for the end of the year.

Wages should increase soon and there should be more consumer consumption, and retail sales growth are starting to pick up.

India

An extended sweet spot. This is a long term, 10-year story. Paled in comparison to the sexy China story. Don't ignore India, or at least at your own peril. There are positive micro and macro elements. India market returned 80%, 14 times PE.

There are some fundamental improvements. Foreign institutional investment hit a record high last years, with many first time investors there.

The domestic mutual fund market has disappointed with net outflows.

Korea

This is the exception to the rest of the region. The market is highly leveraged. The market will do well, only because of its inclusion in the global MSCI index.

Cao is not bullish at all. Credit was easy to get last year. Bank loans on the decline, house hold loans on the decline. Interestingly on the export side. Exports to China have outpaced exports to the US, for the first time.

Singapore

There is nothing fantastic there, domestic consumption is weak. On the up side, it is the most regulated financial market in the region. Hedge funds are the order of the day here.

The de-rating process is underway in the Singapore market. The market is trading at an average pe ratio - but not cheap yet. Home ownership is at a staggering 96%.

Taiwan

Had a good return last year. Cao can't gauge the Taiwan market due to the presidential election until March 20. It's all about politics at the moment. Although there is some signs of life seen in the increase in bank loans.

Thailand

Good play. The most perfect market for a dedicated Asian investor. 140% increase, due mainly to a zero correlation to the US market. Foreigners missed the boat, while the local institutions were the main beneficiaries.

Money chases performance though, and there is now some interest in the institutions. There has been an end of a bull run in bonds.

Consumer confidence levels are up. Everyone is spending. On the corporate side, there is some positive movement too. There is some evidence that the economic momentum will continue.