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Domestic expansion is the key
http://www.sina.com.cn 2005/01/04 11:15  Shanghai Daily

  Asian bank, retail and phone company shares may outperform benchmark indexes this year because of increased spending by consumers and companies.

  "The next stage of the Asian economic cycle will be domestic expansion," said Michael Koh of JF Asset Management Ltd, which invests US$47 billion in Asia. Koh, based in Singapore, focuses on markets outside Japan. "Rising consumer spending will lead the next rally," he said.

  Sumitomo mitsui Financial Group Inc, Giordano International Ltd and Far EasTone Telecommunications Co are among the shares forecast by investors to outperform the market. Stocks that benefit from higher consumption, prices and property values may lift indexes in Japan, Thailand, Hong Kong and Taiwan regions, among the world's laggards in 2004, said strategists such as Markus Rosgen, Asia-Pacific equity strategist at Citigroup Inc in Hong Kong.

  The december 26 tsunami disaster, which killed more than 150,000 people in Indonesia, Sri Lanka, Thailand and eight other countries, isn't likely to cause stocks to drop during the year, investors said.

  "The impact will be minimal" in stock and economic terms, said Khiem Do, who oversees US$3.1 billion in Asia at Baring Asset Management in Hong Kong.

  Borrowing by consumers buying cars and homes and by companies expanding factories helped make bank stocks Asia's top performers in 2004. A measure of banks, brokerages, insurers and consumer lenders in Morgan Stanley Capital International Inc's Asia-Pacific Index climbed 24 percent, beating a 16 percent gain in the main benchmark.

  Sumitomo mitsui shares rose 18 percent in the last quarter after the Tokyo-based bank purged bad loans and President Yoshifumi Nishikawa announced plans to strengthen its consumer-finance businesses. For the year, the stock rose 30 percent.

  Giordano rose 35 percent in 2004 as the Hong Kong-based clothing chain almost tripled first-half profit. In Taiwan, Far EasTone advanced 67 percent as the cell-phone operator's purchase of a smaller rival buoyed sales.

  Investors should favor banks, utilities, phone firms and consumer stocks because stronger currencies and slower global demand are hurting exporters, Citigroup's Rosgen said.

  Forecasts for per-share earnings, cash flow and dividend growth "are all stronger in the domestic sectors than in the export sector," Rosgen wrote in a December 14 report.

  Concerns about exports held back Asian benchmarks in 2004. Indexes of stocks in China's mainland, Taiwan, Hong Kong, Thailand, Japan and Malaysia were in the bottom 20 among 61 market benchmarks ranked by Bloomberg.

  In 2005, spending by consumers and companies may help compensate for slower exports. Asia's economy outside Japan will expand 6.3 percent this year, the Asian Development Bank forecast on December 7. The forecast surpasses the International Monetary Fund's October estimate of 4.3 percent global growth.

  Msci's asia-Pacific benchmark rose last week even as governments struggled with the aftermath of the tsunami disaster. Thailand, where 2,400 people died in tourist resorts, cut its 2005 economic-growth forecast by 0.3 percentage point to 5.7 percent.

  Giordano may gain as consumers spend more. Its Hong Kong stores benefited as Chinese mainland tourists buoyed the city's retail sales for a 15th month in October. Business also grew elsewhere among its 1,450 outlets, which span China's mainland, Taiwan, Singapore and Japan.

  (Bloomberg News)






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