Asia-Pacific Equity Markets Look Attractive Next Year, Says S&P

Source : The Business Times, November 9, 2007

But don't expect the stellar gains seen this year, it warns

(HONG KONG) The strong outlook for Asia-Pacific economies means the region will still be an attractive destination for investors in 2008, but don't expect stock markets to repeat the stellar gains seen this year, Standard & Poors said.

Concerns about the US sub-prime mortgage crisis, rising crude oil and raw material costs, high market valuations and inflation risks, which could limit the scope for any interest rate cut, were all headwinds for regional markets.

'Generally speaking the equity market outlook is again going to be supported by favourable regional economies,' Lorraine Tan, head of Asia-Pacific equity research told a media teleconference.

'The difference for the equity markets is that we've had a very strong year in 2007 in terms of price appreciation. So we would expect it to be much more difficult in 2008. We certainly would not expect the same sort of increase that we saw this year,' she added. MSCI's measure of Asia-Pacific stocks has rallied 39 per cent so far this year, outstripping the 12 per cent gain for global stocks.

Ms Tan said China will remain the key driver for regional markets. 'A lot of liquidity, a lot of growth has been generated by China.'

S&P likes stocks in Hong Kong, including Chinese shares traded in the city, or H shares, South Korea and Thailand, but is neutral on Australia, India, Malaysia, Singapore and Taiwan. It is underweight Japan.

'We're underweight Japan. We think the economy there is showing signs of spluttering again,' Ms Tan said. -- Reuters