Asia To Outperform The Rest of World

1997 was a year of crisis originated from the Far East. Then, the likes of emerging markets such as China and India had not quite come on stream... Ironically, Asia is again hit by financial crisis a decade later. This time albeit is originated from the west, namely U.S, followed by Europe.

Being predominantly export-led markets, Asian shares have been dragged down as a result by the global financial crisis that has seen foreign investors oozing to clear the fire exit. The outlook for this year is certainly bleak, no thanks to the over-dependence on exports. It remains to be seen how long this current crisis would unfold towards recovery. Asia perhaps stand a much better chance to withstand the current storm and outperform global shares in the mid to long term.

Here are my six reasons why.

1. Asian countries do not suffer from the consumer indebtedness and deleveraging that is now causing massive headaches in the western countries.
   
2. Asian financial system never became as dependent on credit markets and its banks are far less exposed to the toxic debt in U.S. and Europe;
3. Asian economies are generally buffered with high foreign exchange reserves, high savings rate and current account surpluses;
4. Asia's favourable demographics, being higher population growth with lower dependency ratio;
5. Asian equities are now trading on a similar valuation to global average. Thus, undervalued and attractive stocks are aplenty across the region.
   
6. Asia's long term growth prospects are still good, with both China and India leading the pack.
   

It's worthy to note that the above reference to the word Asia excludes Japan, which has had experienced stagnant growth for the past 2 decades.