Asia Still Looking Rosy In Medium Term: Tharman

Source : The Business Times, September 11, 2007

(SINGAPORE) The repricing of risk sparked by the crisis in sub-prime debt in the US is not over, but there is no reason to downgrade Asia's economic prospects in the medium term, said Tharman Shanmugaratnam, Second Minister for Finance. Speaking yesterday at the opening of SG Private Banking's new office, he pointed out that the current turbulence does not alter the basic story of an 'ascendant Asia'.

'It introduces significant near term uncertainty, both for the markets and for economic growth, but it does not alter the picture of an increasingly dynamic and resilient Asia in the coming years and decades.'

He said that the growth of SG Private Bank, along with that of the private banking industry, reflected a few fundamentals. One of these is the emergence of Asia as the big story in the global economy. 'Global investors have good reason to believe Asia will continue to outperform other regions for at least another two decades to come.'

Mr Tharman said the fallout in Asia has so far been limited. MSCI Asia ex-Japan is down 1.6 per cent since mid-July and is still up 24 per cent in the current year. Excluding China, Asian markets are up 22 per cent since the start of the year, and 45 per cent since the middle of last year.

Credit bond spreads in Asia have widened but the correction has been healthy and spreads remain below their historical levels. Average credit spreads in Asia recently rose by 100 basis points over US Treasuries to reach about 234 basis points currently. But they remain well below the 400 basis points seen between 2000 and 2003.

He said that there is increased uncertainty over the US near-term outlook, which could impact Asia. But Asian producers will continue to make productivity strides, and Asian consumers will provide an independent growth engine. 'Global investors will, therefore, continue to seek out higher returns in Asia.'

Steve Forbes, Forbes magazine publisher, said in an address that Forbes has a great affinity with private banking as it monitors private wealth. Forbes publishes annual listings of the world's wealthiest individuals. Asia's 160 billionaires, he said, now account for 17 per cent of the world's wealthiest, compared with a share of 14.5 per cent a year ago. This represents several hundred individuals, with assets of over US$650 billion. 'The current crisis is a temporary one. We had a far worse one 10 years ago. The long-term dynamics are very positive,' he said. Forbes is hosting its Global CEO conference in Singapore, bringing together top CEOs with a combined net worth of US$130 billion.

SG's new office is at One Raffles Quay. SG chief executive for private banking Pierre Baer said the move is part of efforts to stay 'at the forefront of this robust trend (in wealth creation), but at no compromise to our service quality'. The office is also its regional hub.