Business

Friday October 16, 2009

Fundamentals to boost Asian stock markets

By FINTAN NG


PETALING JAYA: Better corporate earnings in Asia, backed by stronger economic growth, will boost stock markets in the region with selective stock-picking becoming increasingly important as growth becomes less broad-based.

Singular Asset Management Sdn Bhd managing director Teoh Kok Lin said the economic fundamentals in Asia were generally positive over the next one to two years with private consumption in China, India and Indonesia underpinning growth in the region.

“The challenge is to pick the right stocks because the regional markets have rallied quite a bit since March and growth going forward may not be as broad-based,” he told StarBiz.

Asian markets were muted in their reaction yesterday despite Wall Street’s strong showing in Wednesday’s trade when the Dow Jones Industrial Average jumped 1.47% to close at 10,015.86, the highest since Oct 7 last year.

Tokyo’s Nikkei 225 was the only major index to react strongly with a 1.77% climb largely on the back of advances from financial stocks such as Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc.

BCA Research managing editor for emerging markets strategy Arthur Budaghyan said in a report dated Oct 13 that investors should “tactically sell” developing-nation stocks after a 68% rally in the MSCI Emerging Markets Index this year left prices overstretched.

The MSCI Asia Pacific Index, on the other hand, has climbed 73% from its five-year low on March 9.

Budaghyan said it would be difficult for earnings to keep beating estimates after analysts increased their profit projections.

Meanwhile, Inter-Pacific Asset Management Sdn Bhd chief executive officer Robbin Khoo said stock exchanges in the region, but not the local bourse, were on the verge of a correction in the short term.

“The Asian markets may be due for a correction but the local market is a little peculiar as retail momentum is fuelling it with very little institutional participation so there’s no dynamic change,” he added.

A market observer echoed Khoo’s views on the local bourse, saying that the benchmark index had not moved in tandem with major regional indices, such as Hong Kong’s Hang Seng Index.

“When the Hang Seng dropped 500 points in the past one month, the FBM KLCI only fell several points, people are saying that the market is due for a correction but I believe the Maxis listing and the possible sale of a portion of Sime Darby Bhd’s shares to Chinese investors will move the market up,” she said.


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