Hong Kong harbour

TRENDS IN ASIA

The current global outlook is definitely unstable and places investors in a relative uncertainty over where they should allocate their investments. Among this “gloomy” and very volatile situation, Asia definitely remains one of the only emerging regional market that still benefits from a positive level of confidence as part of international investors and economists. I recently attended a conference organized by the French Chamber of Commerce on current economic trends in Asia. Mr Manu Baskharan (Centennial Asia Advisors) and Antoine Chery, chief of the French Economic Service for Asean were the speakers of this much attended event.

Below is a summary of the main points addressed during the conference:

CHINA: Following an impressive decade of rocketing growth rates, China is definitely entering into a much slower pace of growth. This should not be such a matter of concerns except that historical growth was artifically fuelled by heavy investments, creating by itself a vicious circle. Recent incidents raised fears of a potential brutal landing but the country is still on tracks. As the chinese government is gradually experimenting a shift towards a more sustainable growth (consumer oriented), it is expected that episodic shocks will happen but no collapse.

INDIA: definitely poised to rebound. The fall in crude prices comes to a very oportune time and should help tame the inflation, improve current account deficit and provide a conducive environment for investments. Risks are not alienated though and Modi’s islamophobia culture still represents a true issue that could lead to political divisions.

INDONESIA: Stabilizing but still fragile. Infrastructure, business environment and productivity improvements are the key issues that the government must tackle. Current account deficit remains however the biggest risk to a country that needs such important structural changes. Reforms are on tracks and provided so far a positive sentiment to markets. If proved efficient and well managed the country shall meet up again with min 6% growth rates.

THAILAND: The country is somewhat stabilizing but outlook remains unstable. Political risk is very high in near term and could hamper the government’s recent stimulus measures and country’s exports revival

MALAYSIA: Making a comeback, the country’s outlook is positive in the short-term but more uncertain over the long-term. Structural improvements shall boost Foreign Direct investment but domestic headwinds may hamper this positive outlook (subsidies cut, declining consumer confidence, impending GST implementation).

PHILIPPINES: The situation is one of the best ever experienced in decades. Growth prospects are robust, private and public investments are rising, foreign investors are increasing their presence in the country and a peace deal with muslims rebels in Mindanao was finally signed. But politics definitely remain a worry. Next elections are already in 2 years.

VIETNAM: The country has somewhat overcome the worst, fixing some financial imbalances but the situation remains risky. Growth prospects are hampered by slow credit growth, continued closure of domestic firms and structural problems in banks and state-owned entreprises

HONG KONG : Resilient economy that will definitely benefit of China’s opening, making Hong-Kong the key gateway to Mainland China. Recent protests have definitely raised political damages but all in all long term prospects are positive.

TAIWAN: Relatively positive long term growth prospects thanks to US recovery.

KOREA: positive prospects supported by the US recovery, record foreign direct investments. Drop in oil prices has a double edged impact: It could boost country’s growth but at the same time negatively impact exports if it turns out to be caused by slower demand in China.

JAPAN: Opinions are quite ambivalent. There is a political will for fundamental changes but the country is still struggling to regain momentum as its population declines and ages.

SINGAPORE: Despite domestic headwinds and slower growth prospects, Singapore will be a huge winner of current ASEAN regional integration process. Business friendly environment and positive growth prospects in the region are turning Singapore in one of the key hub to radiate in South East Asia.

All in all, prospects are positive for ASIA but many headwinds could induce punctual downward shock in the short-term. Besides this relative positive sentiment vis-a vis Asia, time is definitely for caution as global environment is clearly gloomy with many uncertainties and fears arising from tensions in Middle-East, Fed rates rise, Europe sluggish growth. Where this could be seen as a difficult scenario for investments, one should remind that this is the perfect opportunity to closely follow those countries that definitely benefit from strong fundamentals allowing them to strongly rebound when clouds move away…though not in the short-term.

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