Friday, November 07, 2008

Morgan Stanley Asia Not So Bearish

Probably still the best strategic house in Asia, Morgan Stanley Asia said Asian stock markets and economies can escape the worst of the global downturn, with China, Hong Kong and Taiwan best placed to ride through the turbulence. Equity strategists at the brokerage added to their ``overweight'' position in Taiwan in their model portfolio of stocks and raised South Korea to ``equal-weight'' from ``underweight,'' a report today said. Malaysia was cut to ``underweight'' from ``overweight.''

``Asia's fundamentals are far stronger. A combination of easier monetary and fiscal policy and lower commodity prices should enable Asia to avoid the worst of the global downturn.''

China and Japan have slashed borrowing costs in the past two weeks to ease the economic fallout from the global credit crunch that is pushing some countries into a recession. The turmoil has frozen credit markets and triggered a worldwide rout for equities, wiping out more than $25 trillion of market value this year.

``If the worst of the global liquidity crisis is behind us, macro strength is probably going to become a key market driver,'' the report said. ``This should favor Greater China. A key difference between Asia today and in 1997-98 is the emergence of China as a key driver of growth.'' China's growth will slow to 9.3 percent in 2009, from 9.7 percent this year, the World Bank last month, predicting that the country is well positioned to withstand financial market turmoil. The central bank cut interest rates for the first time in six years on Sept. 15, following up with two more reductions since. On Oct. 29, the key one-year lending rate was cut to 6.66 percent from 6.93 percent. China is the ``strongest'' to cope with the global slowdown while Australia, Malaysia and India ``face challenges,'' Morgan Stanley said.

Malaysia's ``external macro exposure and limited policy flexibility'' makes it vulnerable to the global slowdown. South Korea's upgrade comes as Morgan Stanley added Samsung Electronics Co. to its portfolio, saying Asia's biggest maker of chips and handsets is ``best positioned'' to ``enjoy earnings growth into 2010.''

On Oct. 7, the International Monetary Fund said the world economy would expand by 3 percent in 2009, paring the 3.9 percent forecast made in July. Emerging markets will account for 100 percent of the global economic growth next year, mainly Brazil, Russia, India, China and other Asian economies including South Korea, the IMF said yesterday.

p/s photos: Warattaya Nikulha


David said...

What is up with the KLSE? Why won't it drop more when the rest of the world are collapsing? Somehow, it will always rebound or rally back.

Ivan said...


today up due the region market also up .. .

maybe gov has try help mkt gua..due easy give a insider hand in market after foregin party leave local :D

David said...

Isn't the market supposed to be a foward discounter of future events? The fundamentals in this market is obviously pointing towards recession. Any last good quarters of any companies announced will be their last good quarter for the foreseeable future. People should be dumping those stocks now as the business conditions for the coming months will be gloom. The stock prices should reflect that and go south, instead of going up. Shouldn't that be the logical scenario!!?

Datuk said...

Dear David,

I think KLSE has dropped more than 45% today compared if peak point. Do you think 45% of down turn in index is not enough for us to consider collapse ? In fact, KLSE is in line with other bourses in the region ...virtually in collapsig situation! The only different is the dropped in the KLSE index is less severe compared its peers.

Obviously, there were several factors for that:

i)In the most recent bull cycle, the performance of KLSE has well below its peers in Asia region. Hence, it's within our circle of expectation that the down turn in KLSE will be less severe compared other region.

ii)KLSE is supported by two of our natural endowments, petrol and palm oil. The prospect for these comodities only changed negatively and dracstically in August-september period. Thus, the negative impact for big cap in LSE is less clearer to most of the investors and reserach houses.

iii) The petrol hike in June this year and its hyper inflationary impact across all sectors had destroyed the market demands among the middle class and damanged the consumer sentiment. The sudden changes in the macro and micro economy climate caused, small investors and local institutional buyers will shy away from the equity market. Thus, foreign funds are not be able to liquidate their investment timely. Otherwise, it would incur hugh losses. That's the explanation of foreign stake in bursa is lingering in the range of 19-20%.

Having said my opinion, KLSE will be in down south direction in the next 2 years when corporate earnings are heading in the similar direction.

Thus, when the dropping momentum in index is slow, the recovery momemtum in index is expecte to be slow.

Hence,it's not easy for the small investors to timing for good entry point as the future direction is not clear and the tendency to compare prices by using the previous peak point which is no longer relevent as the earning equation is less visible.

Stay out from the market is more pragmatic as i don't believe anybody can spot the recovery at this juncture. Worse is yet to come.

Ivan said...


I do agree with your point.
Stock price shall reflect the future company earning/ cash flow.. . but in this case, KLCI adi drop > 40%.

I believe some investors (inlcude retails and fund manager) are seek for some bargain hunting, good yield company to invest.

Perhaps 30% of the market participants believe market already at the bottom. Thus, they enter the market .. .

David said...

Oh? Since when, they are so calm and clear headed? Where is the panic selling? Where is the fear? I want to see a distress market. :-(