Editorial»
Around Asia’s markets: Finding profit in a falling dollar
JAN 13 - Asian central bankers’ efforts to curb gains in their currencies versus the dollar may prove as futile this year as they were in 2003. But some say that could bolster, rather than curb, returns for stock market investors. Rising Asian currencies increase the value of the region’s assets in terms of the dollar, the most popular currency for global equity funds. And while exporters’ earnings tend to be hurt by a weaker dollar, companies that are more focused on domestic sales are usually unharmed.
Asian currency gains “will influence overall returns for the year,” says Ray Jovanovich, chief investment officer at Credit Agricole Asset Management in Hong Kong. He expects Asian currencies to gain “at least 5 percent this year.” Several central banks across the region bought dollars last year to rein in their currencies. Companies such as Toyota Motor and Samsung Electronics have been able to limit the impact of a falling dollar by increasing sales volumes and shifting production overseas.
“The Asian recovery is becoming more domestically driven,” says William Pitman, director of Pacific investments at Henderson Global Investors (Singapore). “Historically, Asia tends to outperform in times of relative dollar weakness.” Pitman says he favors shares in China, Hong Kong and Thailand. The Henderson Pacific Dragon fund’s 10 biggest holdings include energy companies like CNOOC of China and PTT of Thailand. Exporters in Asia led last year’s 38 percent gain in the Morgan Stanley Capital International Asia Pacific index, which tracks more than 800 stocks in the region. This year, investors say stocks with a focus on domestic demand may perform better.
The dollar, which fell 11 percent against the yen last year, may lose another 3.5 percent this year to ¥103.21, according to a recent Bloomberg News poll. The dollar stood at ¥106.69 late Friday in Asia. UBS forecasts a 4.4 percent gain in the Korean won this year, a 3 percent advance in the Taiwanese dollar, a 2.6 percent climb in the Singapore dollar and a 3.8 percent gain in the Thai baht. .”The focus will shift from exporters to growth in Asia or China only or domestic recovery in Japan,” says Alan Booker, a fund manager at Legal General Investment Management in London.
Still, while exporters may not perform as well, investors aren’t giving up on them. Asian automakers, including Toyota Motor and Hyundai Motor, saw their unit sales rise by 3.1 percent last year in the U.S., gaining a record third of the market. Toyota, the world’s third-largest automaker, expanded its U.S. market share by 0.8 percent to 11.2 percent last year, its highest ever. Hyundai, South Korea’s largest automaker, increased its market share by 0.2 percent to 2.4 percent.
Samsung Electronics, which gets about 70 percent of its sales from overseas, said in October that it expected fourth-quarter profit to rise to a record, led by rising sales. .”I don’t think it’s time to write off the exporters,” says Jovanovich. “While their performance has been tempered somewhat by stronger currencies, I still think there’s room for them to improve their market share.” Others say stick with companies focused on domestic businesses. .”Companies have restructured their businesses and they have reduced costs, making them more efficient,” says Nobuki Goto, a fund manager at Tokio Marine Asset Management in Tokyo. He still prefers companies focused on the domestic economy or Asian commodities, including NTT DoCoMo and Mitsubishi Corp., Japan’s largest trading house. Posted on: 2004-01-13 02:18
Headlines
Advertisements
