North Asia Investments Will Outperform South Asia in 2011

17 May 2011

For immediate release

North Asia Investments Will Outperform South Asia Investments in 2011, Says HSBC

In 2010 North Asian markets like South Korea, Taiwan and China lagged well behind their South Asian counterparts (Thailand, Indonesia, Malaysia and the Philippines) due to domestic issues such as inflation. However, in 2011 this looks set to change with North Asian markets set to outperform those in South Asia according to the latest edition of Investment Intelligence from HSBC.

During 2010 Asian markets outperformed global markets (17% v 10% respectively), and the key performers were South East Asian countries such as Thailand (50.8% growth), Indonesia (31.2%), Malaysia (32.5%) and the Philippines (30.3% growth). Whereas North Asian markets grew at a much lower rate - South Korea (25.3%), Taiwan (18.3%) and China (2.3%).

In 2011 Asian markets are set to rise as strong fundamentals in the region help to attract global liquidity. The North Asian markets look to regain interest as investors go in search of upside, with the valuations of North Asian markets attractive at current levels, trading at a 12 month forward price-to-earnings ratio of around 10 times to 13 times – much lower than other countries in the region1.

Glen Tonks, Head of Wealth, at HSBC New Zealand says: “Investors in Asian equities have obsessed over inflation for the past few months, as CPI surprised on the upside and central banks dithered about raising rates. Now that rates have been hiked multiple times in most countries, and with inflation showing signs of slowing (especially in China), we think worry will shift elsewhere: to the sustainability of global growth. Cyclical indicators in the US and Europe are likely to slip back from current elevated levels, and consumer confidence there is being hit by high oil prices”

“This suggests investors should revert to a preference for Asian markets and sectors led by domestic demand with attractive long-term structural stories, and become more wary on export and cyclically sensitive ones. This is why HSBC Global Asset management is positive on China,” continues Tonks.

“For New Zealand investors, it is prudent to take a little risk off the table in the current environment. HSBC still prefer emerging over developed markets, despite emerging market’s weakness in the first six weeks of 2011. Dedicated stock selection coupled with stringent risk management is key to alpha generation,” concludes Tonks.

ENDS

Notes to Editors

1. Price to earnings ratio across Asia over the next 12 months

2. Some of the key growth drivers for China, Taiwan and South Korea in 2011 include: North Asia investments will outperform South Asia investments in 2011, says HSBC/2

China

2011 markets the commencement of China’s 12th five-year plan. A number of sectors are likely to benefit as the government maintains stable economic growth, shifts the economic model to be more consumption driven, improves industrial efficiency and focuses on inland development

Healthy GDP growth

Taiwan

The improving social and economic relationship with China

Under the ECFA (European Cooperation Framework Agreement) individuals from China may start to be permitted to travel to Taiwan

The Presidential election in 2012 – based on historic data the market usually performs well with the Government usually launching favourable policies

South Korea

Market uncertainties have eased as the geopolitical situation on the Korean peninsular has improved recently

Attractive valuations and strong fundamentals

Outlook for export oriented markets should be positive – in particular the technology sector

3. The HSBC Group in New Zealand

In New Zealand, HSBC offers an extensive range of financial services through a network of branches and offices. These services include personal and commercial financial services, payment and cash management, trade finance, treasury and financial markets, corporate banking, investment advisory and securities custody. The principal HSBC Group member in New Zealand is The Hongkong and Shanghai Banking Corporation Limited, incorporated in Hong Kong SAR, acting through its New Zealand branch.

4. The Hongkong and Shanghai Banking Corporation Limited

The Hongkong and Shanghai Banking Corporation Limited is the founding and a principal member of the HSBC Group which, with around 7,500 offices in 87 countries and territories and assets of US$2,455 billion at 31 December 2010, is one of the world’s largest banking and financial services organisations.

5. Investment Adviser Disclosure Statements are available free of charge on request from any HSBC office.

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