Worry Over US Crisis Takes Shares Down

Source : TODAY, Thursday, August 30, 2007

Indonesia among the Asian economies that could buck trend

ASIAN shares fell yesterday in a broad selloff sparked by worries that a housing slump and credit crisis in the United States will pull its economy into a slowdown, or even a recession.

The falls show that for all the talk of decoupling, few Asian stocks are holding up well to pressure and even those are unlikely to avoid being dragged into the mess.

Still, indiscriminate selling creates buying opportunities, and that means stock pickers are likely to be busy these days scrubbing their markets to find companies that are least likely to be impacted by a slowdown in the US.

Analysts say two groups are worth exploring: Those housed in economies that aren’t exposed to the US and the infrastructure giants whose work comes with long-term contracts that aren’t exposed to the factors that will weigh on the US economy.

The big picture is a starting point. ABN Amro recently ranked Asian territories by their exposure to a US slowdown, categorising Thailand and Taiwan as having the highest risk — thanks to their dependence on exports for gross domestic product growth — and India and Indonesia as having “relatively low vulnerability”.

“Indonesia’s reliance on exports to the US is one of the lowest in Asia, with economic growth mainly driven by domestic factors,” Citi Investment Research analyst Stephan Hasjim said.

The Indonesian government has said it plans to increase its capital spending by nearly US$11 billion ($16.7 billion) to pay for infrastructure projects — from highways to electricity and irrigation infrastructure.

Bank Rakyat Indonesia and Bank Danamon Indonesia stand out as two banks most likely to increase earnings as they do their loan portfolios and are also sheltered from falling yields on bonds and assets.

But for those unwilling to count on companies being able to survive the spillovers sure to come their way, a second transnational group of stocks might offer a compelling opportunity.

These are the giants that build national infrastructure like airports, power plants and roads that countries like Indonesia are pouring billions of dollars worth of investments into.

“Infrastructure is a megatrend,” said Mr Roger Groebli, head of Asian equity research at ABN Amro Private Banking. — DOW JONES