China in the Driver's Seat

The continuing rise of China will help drive economic growth and development in Asia in the long term, according to David Ng, an economic analyst at HwangDBS Investment Management Bhd

He is confident that a sustainable economic recovery will take place in Asia (excluding Japan), mainly with China as its driving force.

“We also foresee that plenty of Asian-themed investment products will be made available to the public which we believe will feature strong upside stories,” he said in a statement today.

Ng said a new pecking order has emerging as a result of the financial crisis, adding that “we are picking up more positive signs that point to a definite recovery such as the narrowing of corporate spreads, a turnaround in the global diffusion index and higher equity valuations or price to earnings ratios”.

According to him, the current global economy is still relatively fragile and economic growth is expected to remain below its potential for a few more quarters before making its full recovery.

Ng said HwangDBS IM is bullish on the Asian markets, adding that growth signals pointed to Asia as the most economically dynamic region in the world.

“China is at the front and is seen to be aggressive in its approach to stimulating local growth and consumption. Increased lending by banks, higher real wages, a booming middle class and growing individual wealth will inevitably lead to higher disposable income and consumption,” he said.

Ng said in the near future, companies in Asia would be able to generate more income and over the long-term be considered lucrative stocks to hold as dividends become a big part of the total returns.

“We have identified a few multi-year investment themes that will drive long-term growth such as China’s economic growth, the burgeoning global middle class, ageing and changing population trends,” he said.

“China is certainly our favourite pick. Its enormous government stimulus spending of more than US$586 billion (RM1.9 trillion) and aggressive re-leveraging will prompt a rise in local asset prices.”

Ng also advised investors to exercise extra vigilance in choosing suitable products for themselves.

“Economic cycles are getting shorter and the pendulum swings both ways,” he said.

“Simple investment basics works in any economic environment. In today’s environment, investors should slowly average in the market and exercise discipline once investment goals are met.”

Good advice, I think.