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Chinese whispers suggest new hope for Asia Pacific equities

25 January 2008 / by Joy Tibbs
Aberdeen Asset Management believes that there will be further positive opportunities for investors in the Asia Pacific region in the near future, despite declining share prices recorded in the last few days. Indeed, the company claims that further price corrections will be good for "the financial health of the region".

Prices started falling in the final quarter of 2007 and the trend has continued through January following a year of huge investment in Asian stock markets from across the globe. Investment was sky high last year despite rising raw material prices and concerns over the US sub-prime fiasco.

Managing director of Aberdeen Asset Management Asia Limited, Hugh Young, says: "Recent share price falls in Asia are not surprising given how hot and speculative some markets and sectors got last year despite the challenging global environment."

Many investors were attracted to the region due to its strong economic fundamentals and long-term potential, although the incredible surge in share prices could not have continued forever. Aberdeen predicts that 2008 will be a much more challenging year for Asian equities and advises investors to weigh up the risks involved, for example the possible knock-on effects of a global recession.

"While some sectors and markets now look vulnerable to further corrections, others still offer decent value to high conviction stock-pickers," says Mr Young. The company urges caution but believes Asian economies continue to be "fundamentally sound".

Meanwhile, Prudential's share prices rocketed yesterday after an announcement from chief executive, Mark Tucker, which implied the company would welcome long-term investors in the business. Speculation that China-based insurer Ping An is interested in buying a stake in the firm lifted Prudential share prices by a reported six per cent in early trading.

Such a deal would give Prudential wider reach in China; a country that still heavy restricts foreign investment in domestic companies. Despite fears of a recession across the globe, large Chinese companies are likely to pursue further foreign investment opportunities, particularly in the UK and the US.

The emerging markets could also appeal to Chinese investors looking to take advantage of low prices. According to the Asia Times, economist with the Chinese Academy of Social Sciences Zhang Ming is advising CIC (China Investment Corporation) to: "Set its targets on emerging markets where there is a lack of capital and they are looking to attract strategic investors."

© Fair Investment Company Ltd