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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Money & Investing

Value -- Right Here in Asia
Don't let strong gains elsewhere steer you away

manages Scudder's Pacific Opportunities and New Asia funds out of New York with Elizabeth Allen. She thinks Asian stocks are as attractively priced as they have been in many years. And regardless how the current rally turns out, she is bullish on Asia

(Source: Datastream)

The Dow's recent rally lifted some Asian markets after weeks in the doldrums. Ultimately, however, markets from Thailand to Korea, from Malaysia to Hong Kong, will sink or swim on their own. U.S. mutual funds have been moving away from Asia into Latin America and Eastern Europe, where markets are having a good run. Investors can expect that trend to end sooner rather than later, says New York-based fund manager Theresa Gusman. She and colleague Elizabeth Allen run both the Pacific Opportunities Fund and New Asia Fund for Scudder, Stevens & Clark in New York. Gusman spoke recently to Asiaweek's Assif Shameen.

What is it about Asian economic fundamentals that causes you to be optimistic?

Four cycles conspired to restrict growth since Asian markets peaked in early 1994. First, Asian central bankers tightened credit to combat overheating. Second, weakness in Europe and Japan meant exports from Asia slowed. Third, electronics turned down globally last year. Prices for DRAM, or memory, chips fell by 85%. Finally the U.S. sharply reduced its inventories last year for both electronics and apparel, which are key exports for Asian countries. The stage has been set for many of the Asian markets to take off -- sooner rather than later. Corporate profits should improve over the next year or two, and we believe all this will show up in equity prices. Valuations in Asia are starting to look very attractive.

Some U.S. and Europe-based fund managers say politics is becoming a concern for them in Asia? Is that already reflected in the price?

Political concerns in Asia, like anywhere, are built into the stock price. It doesn't mean the market will perform badly. If the underlying economic environment is positive, you know the country is going to come through.

What about market fundamentals in Asia?

Prices look a whole lot more attractive now than a few years ago, when most markets were selling at 25 to 30 times earnings and more. At the end of 1993, people were scrambling to buy Asian stocks at very high prices. Now, we see a lot of value. The average Asian stock is selling at 15 times this year's earnings. Whether U.S. investors focus on this point remains to be seen.

In recent weeks, a lot of mutual funds have pulled back from Asia and gone into Eastern Europe and Latin America. Is that trend long-term or temporary?

Brazil is up 26% in the past 12 months. Egypt is up 39%. Some Eastern European markets are strong. That's where investors are going. But our view is that past performance should not drive where the money goes.

Would rising U.S. interest rates hurt Asian equities or drive U.S. funds to Asia?

In the short term it could have a negative impact although over a longer period, one or two small increases are already factored into the price. We are seeing some sharp recoveries in Asia, partly on the back of a reduced expectation that a rate hike is coming. Even if the rates were to go up several notches from here we don't think they would stay up. Higher rates would hinder U.S. growth sufficiently to allow them to fall back quickly.

Have markets in Korea and Thailand hit bottom? Are there other markets that could go the same way in the foreseeable future?

After a recent trip to Thailand I believe things are going to remain depressed there for some time. Korea is highly leveraged to global economic growth, and a positive global environment could therefore present some attractive opportunities. Many investors are concerned that there might be other markets facing Thailand-like problems. The Philippines market has suffered a bit in recent weeks, for instance. But we don't think Manila will be as bad as Bangkok.

What sectors or markets look most attractive in Asia?

Our focus is on individual stock selection rather than picking markets. We focus on specific company characteristics. We look for companies that are undervalued, growing, well-managed, and dominant in their markets or at least well-placed with market niches. We like some of the conglomerates with regional interests in telecommunications or trading. We also like well-positioned local companies with globally dominant partners, particularly in the auto sector where many large local companies have a Japanese partner and a huge local distribution network. Among the biggest holdings in my portfolio are HSBC, Hong Kong conglomerates Hutchison Whampoa and First Pacific, Indonesian auto distributor Astra International and Taiwan shipper Evergreen Marine.

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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