ASIA - Asian countries excluding Japan will continue to see strong economic growth, resulting in "robust corporate profitability", industry experts have predicted.
Templeton Investments has said that significant “structural changes in the economies and cultures” of China, India, Thailand and Malaysia are creating opportunities for long-term investors that will enhance investor returns and corporate prosperity.
In terms of equity valuations, Templeton believes that Asia ex-Japan currently compares favorably with the rest of the world on a price/earnings and price/book value basis, with its return on equity ranking “very high”.
Barings Asset management has also said that economic conditions in Asia will provide investors with superior risk adjusted returns for the remainder of the year.
Commenting on the findings, Peter Wilmshurst, research analyst Templeton Global Equities, based in Melbourne, Australia, said: “The argument for long-term equity investment in Asia is even more convincing in light of valuations.
“Consider that since December 1998, the constituents of the MSCI All Country Asia ex-Japan Index have collectively grown their revenue to almost US$600bn, doubled their earnings to $130bn, and nearly doubled return on equity to 18%.”
Tom Maier, BAM’s head of alternative investment and overall manager of the $90.8m Asia Hedge Select Fund commented: “We expect markets to consolidate within a range over the next few months before resuming an up-trend. Barring a US recession, Asian markets are likely to have a positive tone for the remainder of the year.”
In the last few years, the median payout ratio in 11 Asian countries rose from 36% in 2000 to 43% in 2002 and 2003, and remained high at 39% in 2004, according toMerrill Lynch.
In 2005, the largest increases are expected to occur in Thailand, Taiwan, and South Korea.
Simon Rudolph, ACA executive vice president portfolio manager based in Hong Kong, added: “Improvements in corporate behaviour over the past several years have added significantly to Asia’s attraction.
“An improved business focus has resulted in the disposal of non-core businesses, rationalisation of core operations, and improved cost control.
“Accounting transparency has improved and corporate governance has been lifted to a higher level.”
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