Vol 10, No 4 - Financial Planning Association of Malaysia

MARKET OUTLOOK
October - December 2010
By David Ng
Flavour of the Year:
Asia Emerging Markets
Asia Emerging Markets will be the Best
Investment Regions in 2011
The emerging markets of Asia will be the
best regions to invest in 2011 and over the
long-term due to its solid fundamentals
and strong corporate and government
balance sheet. Together, these factors
present an exciting and sustainable
growth opportunity for investors.
Regardless of market environments, there
will always be money to be made. It is a
question of what, where, at what risk
levels, and how these opportunities can
be maximised.
The focus in 2011 should be capital
preservation and income due to slowing
global growth and an expected extended
low interest rate environment in the
developed economies. No doubt the
developed markets are experiencing a
slowdown in their growth, but we believe
there will be no double dip 1 .
Instead, we are expecting a ‘soft landing’ in
the global emerging markets in the New
Year, a situation where growth activities
are decent enough to avoid a recession
but cool enough to avoid overheating.
Amid such an environment, investors
should adopt a fairly defensive investment
strategy where the focus will be on capital
preservation whilst capitalising on strong,
dividend-yielding investments that will
generate regular income streams and of
course, keep up with the inflation rate.
This rather conservative form of investing,
as opposed to focusing on making
windfall-like returns, is recommended
due to slowing global growth and the
extended low interest rate environment
especially in the developed markets.
Right now, all figures point to Asia Emerging
Markets (AEMs) as the next growth story.
The region’s solid fundamentals such as
positive demographics, young population
(Figure 1), urbanisation and rising middle
class are expected to drive domestic
demand and these are model traits of
sustainable growth in the long-term.
The growth momentum in AEMs is
very encouraging – China’s purchasing
managers index (PMI) was above 50 2
(Figure 2) which means there were
manufacturing expansions in September
Male
Indonesia - 2010
100
95
90
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
Female
15 12 9 6 3 0 0 3 6 9 12 15
Population (in millions)
Figure 1: A typical “Christmas Tree” population pattern
of an Asian emerging market like Indonesia. A younger
population base will help to fuel future growth.
58
56
54
52
50
48
46
44
42
40
Figure 2: China’s PMI.
2007 2008 2009 2010
The 4E Journal 45