Thursday, July 8, 2010

Global recession unlikely: Analysts

THE global economic recovery will continue but at a slower rate than in the past two quarters and a slide back into recession should be avoided, according to Credit Suisse analysts yesterday.

The Swiss bank's head of Asia-Pacific research, Ms Fan Cheuk Wan, said that while some economists fear another slump this year following job losses and a decline in world manufacturing, she believed such views are 'overly pessimistic'.

Many economies hit a speed bump in the first half due to the problems coming out of Europe, said Ms Fan.

But according to the bank's chief economist for Asia, Mr Joseph Tan, the effect on Asia is 'next to zero' because the nations most affected by the crisis - Spain, Portugal and Greece - account for only 4 per cent of Asian exports to Europe.

'As long as core Europe (France, Germany and the Netherlands) can hold itself up, we should focus on the US and not be overly concerned about Europe,' he said.

Asia is also protected by its low debt to gross domestic product ratio. Most Asian countries have ratios below 40 per cent while the United States and Europe struggle with ratios of more than 100 per cent.

This allows Asia to consume without worry as it normalises its monetary policy.

Mr Tan also said he anticipates more liquid Asian currencies like the Singapore dollar, Korean won and Australian dollar to appreciate in the near future, towed along in the wake of the rising Chinese yuan.

Credit Suisse believes the yuan's appreciation reinforces China's robust growth and advised investors to target commodities such as iron ore.

Ms Fan urged investors to 'look for value' and be cautious about investing in downstream goods such as steel and aluminium.

The bank also recommended investing in consumer stocks from firms such as milk company China Mengniu, sports apparel group China Dongxiang, Indofood, Samsung and Shiseido.

Source: Straits Times, 8 Jul 2010

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