Investing in Asia in Times of Uncertainty
The European debt crisis is likely to continue to cloud the investment outlook for Asia in 2012. Even if Europe is able to convincingly tackle its current problems, investors in Asia need to adjust to how global economies have permanently changed in the years since the onset of the 2008-09 financial crisis and how this altered environment will now drive long-term investment returns.
In particular, an on-going de-leveraging of western economies, together with generally lower expectations for secular long-term growth, suggests that the west will remain vulnerable to economic shocks in the years ahead.
We are encouraged that policy makers around the world seem to understand the challenges currently posed to the global economy. Still, the shocks, political polarisation and the limited policy options available to the west do pose clear risks that could potentially hinder the long-term rebalancing of global economic activity towards Asia.
In Asia itself, the cyclical backdrop has been improving. Growth and inflation rates have slowed in recent months, creating a regional backdrop that is more conducive to investment. Imbalances, as currently present in regional property sectors, together with the wide disparity of incomes, suggest a slowing growth outlook in 2012.
