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While Asian stocks have enjoyed a good run, the reality is that the continued flow of upbeat company news is offsetting share price appreciation as earnings continue to strengthen.
By Fund Strategy Tuesday September 22, 2009
Liz Evans, the manager of the newly launched Asia Pacific fund at Cavendish Asset Management, says on current valuations the market is still attractive despite the strong rally witnessed.
“The global crisis has made the recovery story more resurgent as Asia has emerged in much better shape than the West,” Evans says.
Just days after Cavendish Asset Management announced its fund launch, Veritas Asset Management revealed it will launch a China fund in October. Ezra Sun, the manager, describes China to be “one of the most exciting markets for the next decade”.
In terms of investment opportunities, China and India have shown the best performance, says Alistair Thompson, the deputy head of Asia at First State Investments.
China has benefited from economic recovery driven by government-directed bank lending, while India investors responded positively to better than expected performance by the Congress Party in elections.
“While some commentators are calling for a correction in China, and it has had an incredibly strong run in the last few months, the nature of that correction is likely to make China remain attractive,” she says. “In reality, a lot of money is waiting on the sidelines to buy into the region on a dip, which has meant that all corrections to date have been small, and often stock or sector specific.”
Evans says it would take considerable, unexpected news flow to redress that view in the wider market. “China is simply too compelling a growth story on 8% GDP set against feeble or negative growth in many other markets,” she says.
Of the smaller markets in Asia, Thompson says, Indonesia and Thailand outperformed earlier this year as they rallied strongly on the return of risk appetite in the second half of the period.
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