Malaysia - 'China slowdown to benefit Asean'

The uptick in the US economic data and early signs of bottoming in China’s slowdown are giving Asean a good opportunity to deploy money into sectors that provide exposure to economic growth in China such as banking and insurance in the H-Share market, said Hwang-DBS Investment.

Hwang-DBS said high quality dividend stocks and bonds in Asia will continue to do well as interest rates remain low in developed markets.

"In addition, we believe that the green energy sector in China will be a potential beneficiary of the China government’s push towards cleaner energy sources for the country.

"This will encourage assets inflow into the Asian region as the search for superior yield continues, providing support to the asset price," it said in a research note today.

The research house said the leadership transition in China will be smooth and positive for the Asian and local market as Xi Jinping and Li Keqiang are tipped for the role of President and Premier, respectively.

It said the new party should be pro-business as Xi is an ‘elitist’ who supports businesses and enterprise and is also seen as a ‘populist’ who does not compromise social welfare for business growth.

The research house said Li is seen to support greater international trade relations as well as the promotion of green energy sources.

"This inclination could herald greater emphasis on growing greener and cleaner energy and points to the continuation of the robust bilateral trades between China and the rest of Asia," it added.

Hwang-DBS said at the rate of 7.5 per cent growth a year, it is reasonable and sustainable for China to keep its economy from overheating, but warm enough to keep unemployment in check.

Besides, the China government has enough reserves in their coffers to ensure that their economy will not be too cool such that it results in unemployment, it added.

"The government will not risk the unemployment rate spiking and they will do what they can to keep this rate in check as changes by even one percentage point will be too much to handle.

"To add to that, the new leaders will implement policies to ensure they start their administration on the right footing," it said.

On the recent US election, Hwang-DBS said the loose monetary policy in the US will continue for the time being, as President Obama blazes into his second term.

"This means the market can take a short breather for now, knowing that Ben Bernanke will remain Fed Chairman for the time being, and his “accommodative monetary policy” will provide the much-needed lifeline to the US economy, despite concerns that the sustaining power QE3s (Quantitative Easing 3) are getting shorter," it added.

It said the Hurricane Sandy aftermath provides an opportunity for the US government to pump-prime, rebuild the cities, tend to the welfare of those who are affected and to reach a compromise on the “fiscal cliff” terms such as extension on tax breaks on certain sectors, raising the debt ceiling and milder budget cuts to make life less painful for everyone.

"If the market accepts it well, this will be positive for Asean and our local market” it said.

Bernama

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