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Barings warns of risk of missing out on recovery in Asian markets

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Investors could forgo some of the best returns if they stay out of the Asian equity markets too long, according to analysis of MSCI statistics carried out by Baring Asset Management.

Investors could forgo some of the best returns if they stay out of the Asian equity markets too long, according to analysis of MSCI statistics carried out by Baring Asset Management.

The research shows that the 18 rallies seen in the Asian markets since December 1987, when Asian indices were launched by MSCI, have, on average, produced returns of 43 per cent in US dollar terms in six months.

The fastest rally saw the MSCI AC Far East ex Japan index rise by 50 per cent in just 49 days between 12 January and 2 March 1998, while the strongest rally was responsible for a 73 per cent rise in the index over the 11 months between 3 December 1992 and 12 November 1993. The index rose by almost the same amount (72 per cent) in less than half that time between 1 September 1998 and 7 January 1999.

Analysis by Baring Asset Management of the US equity market shows that rallies have historically been weaker and less frequent than in Asia.

The rallies seen in the S&P 500 Index since December 1987 have returned a smaller average of 29.9 per cent in US dollar terms over a longer average period of 245 days. There have also been more rallies in Asia than in the US – 18 versus ten in the US during this period.

Khiem Do, head of Asian multi-asset at Barings, says: ‘Asia, like the rest of the world, is facing difficult economic conditions. The market may still have further to fall but the evidence suggests that when a recovery does happen, Asia’s equity market rally is likely to outstrip many other markets around the world, particularly the developed markets.

‘Asia has seen a particularly sharp fall and we can expect any rally to be rapid, too. The danger for investors is that if they wait too long on the sidelines to be convinced about a recovery then they could miss out on some of the best returns. Taking a long-term view, and staying invested, is the best way to make sure you participate in the rewards Asian equity markets can bring.’

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