Volatile East Asian markets still appear ripe for investment

16 November 2007
Investors have been keeping an eye on opportunities in the Asian markets for some time, following particularly rapid growth in China. Indeed, analysis of MSCI data carried out by Fidelity International reveals that China has at least one top-ten company in six major industrial sectors.

These include mobile phones, banks, life insurance, real estate, oil and gas production and forestry and paper. Moreover, Chinese companies quoted on mainland markets represent just 3.3 per cent of world equities.

At the end of the month, the MSCI indices will show PetroChina to have risen from 20th ranking among the largest listed companies in the world to top of the list. The country also has the most valuable bank, China Construction Bank, and the largest mobile phone company, Hong Kong-based China Mobile. In 2000, only two Chinese companies ranked in the top ten of their respective sector; China Mobile and Citic Pacific.

Hong Kong as a separate entity is another example of burgeoning personal wealth and company performance. According to a recent Datamonitor report, the number of millionaires in Hong Kong is set to rise from 51,000 in 2006 to more than 83,000 by 2011. Their assets are likely to rise around 11 per cent from $150 billion to almost $250 billion, leading to greater liquidity in the markets.

"Hong Kong is a major financial centre for Asia with a global reputation as a strong financial hub," said head of sales and capital introduction for Fimat Alternative Investment Solutions, Kirby Daley.

And, although there have been warnings of a slowdown and even a downturn, many believe East Asia still has plenty of scope for growth. Manager of the Fidelity China Focus Fund, Martha Wang, said her long-term expectations were that: “China will continue to offer some very attractive opportunities to investors. At just 3.3 per cent of world equities, China has a long way to go before its economic might is represented fully in the stock markets.”

“We expect that the stronger growth momentum in the [East Asian] region will carry through 2008," World Bank analyst Milan Brahmbhatt said, suggesting that the region could escape the negative impact of the sub prime crisis. He adds, "If one looks over the history, it's quite striking that the correlation between US recessions and Chinese economic growth is very little."

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