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ING - Private Banking Asia

By Chew Soon Gek, CFA

Neo Teng Hwee, CFA

Nigel Tan

Geographic focus: Asian equities

Client Profile: Male or female aged 18 to 60. Client has surplus cash and can take some impairment to capital.

Risk: Above average volatility

Time frame: At least 3 years

A new peak for Asian equities?

Asian equities still beckon.  Asia today has a wider choice of quality companies with interesting growth prospects compared to the early 1990s.  The markets are moving from a liquidity-driven phase to an earnings-led recovery.  For 2004, we expect earnings growth of more than 20% on a forward multiple of 19x.  Asia trades at a discount to the world markets on P/BV, but with similar ROE.  There is plenty of liquidity in the banking system, with Asia's local investors sitting on US$2.1 trillion of bank deposits.   This stands at 140% of GDP versus an average of 85% between 1991 and 1997.  The Asian corporate balance sheet has been cleaned up, with net debt to equity at 38.5%, the lowest leverage rate over 20 years.

The long-term sustainable economic growth rate of Asia will be significantly above the developed world due to continuing labour supply growth and productivity improvements.