Buy­ing the dip? Choose Asia

Financial Mirror (Cyprus) - - FRONT PAGE -

re­sults to show up first in com­mod­ity-in­ten­sive in­dus­tries such as air­lines, pro­cessed foods and autos, with a lag of up to two quarters. In the longer run, Emerg­ing Asian economies’ nom­i­nal growth rates (in USD terms) are run­ning at about twice the level in the eu­ro­zone, hence cor­po­rate prof­its should out­per­form.

To be sure, Emerg­ing Asia’s eq­uity earn­ings growth de­pends on get­ting a help­ful lift from the US and EU economies, es­pe­cially since Chi­nese growth is soft­en­ing. For­tu­nately, the US growth out­look re­mains de­cently strong with lead­ing in­di­ca­tors such as the ISM man­u­fac­tur­ing PMI de­fy­ing mar­ket con­cerns. Fur­ther­more, a stronger US dol­lar and weaker en­ergy prices rep­re­sent an ef­fec­tive tax cut for US con­sumers. The big ques­tion mark in this equa­tion is, of course, the weak state of the eu­ro­zone econ­omy. Gavekal has mixed views on this topic, but there are rea­sons to think that this week­end’s As­set Qual­ity Re­view re­sults re­lease will at least take away one more un­cer­tainty.

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