亚洲新兴市场在哪里诞生?

-A good year for most of the Asian markets. But if you read what people are saying about 2011, there’s a lot of bullish talk about the US, there’s a lot of talk about commodities going up, still gold particularly, may be $2,000 an ounce, also oil going up. Why then is there still a compelling story here in Asia?

-There are a couple reasons why it’s compelling. Number one, if you look at the valuations, they are at historic averages. So OK, when not as cheap as we were coming out of the crisis, but we saw in that one year expensive. So number one is you’ve got value, and value determines your overall return. And number two, you’ve got growth, and clearly global investors want to buy growth. Asia has plenty of it. So that’s a second reason to be here. Thirdly, if you look at where interest rates are, in most of Asia, if you look at deposit rates, deposit rates are negative in real terms. So for the retail investors in Asia, which, if they have about $15.5 trillion in bank deposits, they’ve been looking to do something with their money. They don’t wanna lose money in real terms. So they can either buy real estate, which has become more expensive and governments have come in and put measures, or they can go and buy equities. So for them, the fund flow continues to be really to push them towards equities. So valuations are fine, you’ve got growth, there’s plenty of liquidity, plenty of capital here that can be deployed and that’s what pushes markets higher.

-OK. We just saw some of the numbers from the more, I guess, exotic markets if you like: Jakarta up 46; Thailand up 41; and Shanghai was down, 40 or (so) percent. So where should the money be flowing in 2011?

-Well, in 2010, the money basically went towards domestic equities, which is why Southeast Asia did a lot better. There’s a lot more domestic than there are on Korea where it’s more export-driven. And it gained and made a lot of sense given that everyone almost was worried about double dip. You had the euro crisis. And now if you look into this year, what’s beginning to happen is global leading indicators are recovering. If global leading indicators are recovering, you want to own more cyclicals. If you want to own more cyclicals, Korea will do better, Taiwan will do better and even China, ultimately once they finish tightening, will start to perform again, so…

-So we go from Southeast Asia to North Asia, basically.

-So we are basically moving from Southeast Asia, from the domestic economies, from the consumer economy towards more cyclicals, industrials, oil energy and that kind of a space.

-The gains you are expecting?

-Yeah, I mean we are expecting 20 to 25 percent return this year.

-On what? On those individual markets?

-On the index. You know

-The Morgan Stanley…

-The Morgan Stanley index was up 15 percent last year. And again, in the third year of a recovery, what you always have is an acceleration of returns compared to the second year. So we had 15 last year, 20 to 25 is not unaggressive, given what evaluations are, and markets always end when they are expensive. And they are not expensive, but in order to get expensive, they are gonna go up.

-But you’ve got a couple of things. You mentioned China inflation story, a US economic recovery which is fragile at best--unemployment at 10 percent and it is still the world’s biggest economy-- and eurozone debt crisis which is still very much in play. So those three factors alone, what are the chances that one of those could derail your sort of outlook?

-Well, the biggest risk for Asia is always and continues to be the dollar. If the dollar begins to rally strongly, it just sucks out liquidity from Asia. If it sucks out liquidity from Asia, equity markets here don’t go up. So what would drive the dollar higher, either inflation is growing in the US and US rates.

-Unlikely?

-Yeah. US rates go up or Europe falls apart. And once that’s OK, I’m gonna hedge my euro. I won’t wear another’s. I’ll just go and buy US dollars. The thing with the euro is you have the euro funding in place, you’ve got money and most of it is covered in terms of yet the issuance from the governments over the cost this year. So from that perspective, it was highly unlikely that Europe causes the same kind of stresses and strains this year as it did last year. So from that perspective, you know, obviously US rates don’t move this year, ECB doesn’t move this year, the BOJ doesn’t move this year…

-And China doesn’t fall out of it.

-And China doesn’t fall out of it. China tightens further, but they tighten, you know, maybe 100 basis points. And that’s kind of aid as far as inflation is concerned. So it’s quite been an environment for equities, which is why they tend to go up.

-So over the past several years, this would be one of the best years you think to invest in this part of the world?

-Yeah.

-OK, we have to leave then, Markus. Thanks so much for coming in.

-You are welcome.