GLOBAL - Pension funds are likely to increase their allocation to Asia as the region seems poised for a sustained upturn, according to investment managers.
Aberdeen Asset Management said that the reallocation of assets seen by pension funds and other long-term investment vehicles may have only been the start.
Peter Hames, investment director said: “Asia’s economic recovery is looking better. Growth is picking up and company results are reflecting that. Exports are leading the way, as one would expect, but we see domestic demand assuming a bigger role.”
Hames said that Asian markets are fundamentally attractive and still reasonable value compared to European and US markets, even after last year’s rally.
“The conditions are present for a sustained upturn. Companies have maintained their focus and are raising returns, as higher dividend pay-outs show. This should lead price earnings to peak at around 15x this year but fall back in 2005, which is fair value compared to the US and European markets,” he added.
According to him, index weights of 2-5% for Asia are “backward looking”, given the long term economic prospects of the region. He said that some UK funds are allocating between 10 and 15% to the Far East.
Hames said that India could emerge as the dark horse of the region as the capitalist system in the country was ingrained and profit-focussed.
“In many cases India beats China in terms of return on equity, management quality and attention to good corporate governance,” he added.
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