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Seeking Alpha

10 Reasons to Invest in Asia6 comments

by: David HunkarOctober 14, 2009 | about:ADRA/ CAF/ EPI/ EWY/ FXI/ GXC/ IFN/ IIF/ PGJ/ PIN Many stock market indices in Asia have performed very well this year compared to developed markets. For example,China’s Shanghai Composite Index is up 59%, India’s Sensex is up 76.5%, Taiwan’s Weighted Index is up 65.5%,Singapore’s Straits Times Index is up 52.2% YTD as of Oct 12th. European indices have risen about 20-30% this year.The S&P 500 has increased 21% YTD. As growth continues to be sluggish in the developed world, investors are flockingto Asia for higher returns.

So should you invest in Asia?

The answer to the above question is a resounding Yes. The following 10 reasons were identified byCLSA Asia-PacificMarketsin the

CLSA Quarterly, Autumn 2008

report on why one should invest in Asian markets.

1. Asia’s Billion Boomers - People, Money and Aspirations.

Asian countries are growing and creating middle-class and upper-middle class people with plenty of money and thewillingness to spend. The growth in domestic consumption will much be much bigger than the post-World War II growth inthe U.S. By 2020, more than 1.2 billion people are projected to have a per-capita GDP of more than $5,000 as the chartshows below:

click to enlarge

2. China’s consumers will lead Asian and possibly global recovery as the credit markets are loosened and consumerspending increases. The Chinese middle-class is already spending heavily to improve their standard of living.3. Asia’s economic size relative to the US is growing fast. Since the 1990s low, its economic size has doubled relative tothe US economy. As countries like China, India grow Asia’s economic power will rise.4. Asia has the money - lots of it. Many Asian countries have current account surpluses while most developed countrieshave deficits. Countries such as USA, UK have high deficits.5. Asians have plenty of money in the bank. Unlike American consumers who are deep in debt due to the credit bubble,

10 Reasons to Invest in Asia -- Seeking Alphahttp://seekingalpha.com/article/165969-10-reasons-to-invest-in-asi1 of 410/17/2009 10:08 A

Asian consumers have money to spend. The chart below shows the loan-deposit ratio of US and Asian banks:6. Asia is at the start of a demographically driven boost to domestic investment. Hence Asians will take a large role in theirown markets as opposed to foreign investors.7. Countries in Asia are urbanizing rapidly. More and more people are moving from rural areas into urban cities and townsin search of better life. This urbanization process will lead to higher incomes, better educational opportunities and higherspending on the comforts of modern life.8. Chindia will lead the way. In just 12 years, the combined economies of India and China will equal about 60% of the USeconomy. As of this result of this, global political and economic power will shift towards the East.9. In addition to money, Asians are leading the way in the study of hard sciences which include math, engineering, etc. Acountry needs strong and bright thinkers in hard sciences in order to build a better future. More Asian students enroll inhard science programs in universities than American students.10. Growing Prominence of Asian markets. In September, FTSE promoted South Korea to Developed Country status.China’s A shares and Taiwan may be added next. Also “Asia ex-Japan’s weight in the global MSCI has climbed from 3.7%to 6.8% during the past 12 years.”With high savings rate and the strong confidence and eagerness to grow and prosper, Asia presents a multitude ofopportunities for foreign investors seeking diversification and growth.

10 Reasons to Invest in Asia -- Seeking Alphahttp://seekingalpha.com/article/165969-10-reasons-to-invest-in-asi2 of 410/17/2009 10:08 A

This article has 6 comments:

Alphameister:

Comments (791)

FollowCouldn't agree with you more. Thanks for making the case so strongly.

Kevin_T:

Comments (23)

FollowI strongly agree with this, the emerging economies of Asia have the wind at their back due to sound balance sheets,demographics, and freedom from "entitlement drag" that is pulling down the mature Western economies.There are risks in Asia too. Many of these countries including China lack basic human rights and are notrepresentative governments. This could lead to political instability especially if economic growth is interrupted for anyreason.If instability does occur it is likely to develop slowly enough to give the investor time to exit, as long as one paysattention.

Kansas City...:

Comments (14)

FollowOne major issue is our inherent bias when analyzing the potential of these economies. Particularly with the line,"Asians have plenty of money in the bank. Unlike American consumers who are deep in debt due to the creditbubble, Asian consumers have money to spend.". They save more but will not consume at the rate we do. Thus thehigh savings rate doesn't necessarily translate into higher consumption for investing purposes (quite the opposite). Inthe japanese example people culturally save and do not spend. This doesn't help retail investors there.

tunaman4u2:

Comments (439)

•StockTalk (91)Follow"Americanization" of the next few generations of Chinese seems likely though.Does a stronger Yuan vs the USD counteract the growth though? If the USD decline grows the US doesn't the Yuanrise slow down China?On Oct 14 11:33 AM Kansas City Shuffle wrote:> One major issue is our inherent bias when analyzing the potential> of these economies. Particularly with the line, "Asians have plenty> of money in the bank. Unlike American consumers who are deep in debt> due to the credit bubble, Asian consumers have money to spend.".> They save more but will not consume at the rate we do. Thus the high> savings rate doesn't necessarily translate into higher consumption> for investing purposes (quite the opposite). In the japanese example> people culturally save and do not spend. This doesn't help retail> investors there.

Kansas City...:

Comments (14)

FollowTunaman, actually the opposite seems to be true. Since China has re-pegged to the dollar (www.forbes.com/2009 /03...) then with the dollar dropping so does the Yuan. Although it may seem completely counterintuitive that china istalking down the dollar when they have trillions in dollar reserves, in fact they may be gambling and betting a weakeryuan is much more important.

Nojus: