Asia to ride out global market woes


Posted at Jun 22 2008 04:18 PM | Updated as of Jun 23 2008 12:18 AM


Business Mirror

ASIA will continue to weather the prevailing weakness in the global financial market and provide attractive investment opportunities, a study conducted by one of the world’s leading investment banks, ING, revealed.

"Asian economies will remain robust despite the financial-market volatility around the world. We don’t think that Asian economies will not be impacted but we think that the impact will be modest and that there is no country in Asia where we are forecasting a recession," said its regional head for equity Nick Toovey.

According to him, inter-regional trade and domestic demand will help drive economic growth in Asia and markets in the region will remain resilient. "We think that the GDP growth will be impacted marginally and we expect Asia to post strong GDP growth between 3 percent and 9 percent for 2008."

He granted, though, that 2008 is going to be a challenging year for investors everywhere. "The US is falling into recession. The European economies are also facing headwinds because they have an appreciating currency and interest rates which are unlikely to decline. Coming to Asia, we think that domestic economies are much stronger than they have ever been and so we think that medium to long-term, Asia will be the favorite investment destination."

The Philippines may be in for a different scenario, however.

Paul Jose Garcia, ING chief investment officer in the Philippines, said they are reviewing the macroeconomic forecast and it is possible they may be subjected to downside risks in terms of revisions.

"The reason for that is there are a lot of headwinds that Asian economies are facing and also markets are pretty challenging at the moment. Going forward, we [are] not going to see the same kind of appreciation that we saw for the peso and other regional currencies in Asia."

"Our view is that towards the end of the year and early next year, we are going to see possibly a rebound for the dollar and therefore we may not see the peso appreciating as much compared to previous years," said Garcia.

He said the rice crisis would also have a negative impact on the GDP growth this year.

He added, however, that the usual overseas remittance will always be there although at the same time, the same phase of inflows particularly coming from portfolio investments may not be expected.

"The 6.8 to 7 percent growth target of the government this year may not be realistic at this time. In fact, we might see GDP growth possibly at high 5 percent for this year. But still compared to the rest of the region in Asia, that should still be respectable growth," he said.

In terms of inflation, Garcia said commodity prices will continue to put pressure on headline inflation.

ING remains positive on the local equities market. "At the moment we are currently reviewing our earnings forecast for the corporates. We’ll have to take into account the impact of higher crude prices, rice costs, minimum wage hike and transport fares. However, we believe the corporate sector remains resilient despite the challenges."

Over the next 12 months, Garcia sees the PSE index to level between 3,600 and 3,800.