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Asian countries can withstand economic turmoil, says Tokio Marine

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Asian countries with strong balance sheets appear to be in a relatively healthy shape to withstand the economic turmoil, according to Tokio Marine Asset Management International.

Asian countries with strong balance sheets appear to be in a relatively healthy shape to withstand the economic turmoil, according to Tokio Marine Asset Management International.

Hiroshi Yoh, chief investment officer of Asia Pacific ex Japan strategy at the firm, says domestic demand in Asia is likely to remain resilient – helped by domestic stimulus packages – and will support the region’s growth despite the ongoing crisis.

He says Asia remains in an enviable fiscal position to administer expansionary policies. China, with its CNY4trn stimulus measures, is already showing signs of landing, with the package likely to support the economy as early as spring 2009.

‘Bolstered by improving productivity and infrastructure backed by high investment rates supported by high savings levels, a skilful labour force due to continuous upgrading in education, together with rapidly urbanising population, Asia ex-Japan is likely to deliver greater growth prospects over the next few years,’ says Yoh.

In the short term, concerted emergency measures adopted by global governments to restore solvency in financial institutions and market liquidity should help position financial market pricing back at a more rational level, according to Yoh. At the same time, sharply lower commodity prices should provide a welcome relief for Asian stock markets as a whole.

Yoh says that statistics from China are showing signs of bottoming around the first quarter of 2009, attributed to swift and decisive policies of the authorities and efficient implementation on a nationwide basis.

Measures implemented, such as the ‘Consumption Coupon’ in Taiwan have been well-received by locals and implemented successfully to support domestic consumption.

In the IT sector, particularly in Taiwan and Korea, there are signs that the utilisation levels are gradually resuming to commercial levels.

In aggregate, Asia ex-Japan equity as an asset class remains compelling on a historical basis, with the region trading at about 12 times its P/E and 1.3 times P/B and yield spread at one to two standard deviations from the historical mean.

In the medium-to long-term, Yoh says the Asia ex-Japan region continues to offer attractive growth opportunities vis-à-vis global markets.
 
‘At a time when any loss of returns is keenly felt by investors, pension funds can no longer rely on passively managed strategies to capture these growth opportunities. Particularly for Asia, an active management approach is key to unlocking potential areas of growth and positive return through a deep understanding of the local dynamics at work in the various individual counties and companies,’ Yoh adds.

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