Despite the downturn in US market, there is a good chance that asia and emerging markets will continue to report strong economic growth and above-average expansion in corporate profits.
Lower demand from US and the expected economic slowdown in the Eurozone are affecting the Asia and emerging markets less severely than a few years ago for various reasons. Lower exports to the US are being offset by higher exports to other emerging markets.
Surge in domestic demand is becoming an increasingly important growth driver in the BRIC countries (Brazil, Russia, India and China) and Mexico. This is due to rising wealth levels, higher consumer demand and strong investment demand, a result of instrastructure projects.
Many of good Asia and emerging markets' stock prices are down 30% - 50% due to broad market pessimistic sentiment, but their fundamentals just get better and better. Huge gap between the fundamental of the business and valuation of the stock presents great money-making opportunity.
According to Deutsche Bank, investors may pile more than $200 billion into hedge funds focused on Asia excluding Japan this year, betting on emerging markets despite concerns about the global economy and waning risk appetite. Hedge fund investors' predictions that Asia, along with the Middle East and Latin America, will be the top-performing regions in 2008 indicate a clear re-allocation of capital towards emerging markets. When the smart money flow into Asia region, we are likely to expect another bull run from Asia markets.
But some of my friends and readers had reflected to me that stocks investment are too risky for them. I would advise them to buy into mutual funds that invest in Asia and Emerging markets, based on dollar cost average basis. Do not throw all your money in, fresh bad news from US can affect the overall market sentiment.
