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Asia best placed to lead global economy out of crisis

Date: Tuesday, January 6, 2009
Author: Hedge Funds Review

A combination of healthy balance sheets, structural improvements, continued urbanisation and consumer demand all point towards economic growth remaining robust in Asia over the long term.

Barings expects China and India to account for 50% of world GDP growth in 2009 and emerging markets to make up the remaining 50%. The developed world, including the US, is unlikely to contribute to growth in 2009.

Investors should not abandon the equity markets of Hong Kong and China, the bank says.

"The case for Asia looks compelling across all asset classes, some of which are even trading below cost production. Asian market valuations are at an 18 year low, caused by the forced selling over the past few months, as a result of de-leveraging and de-risking by offshore investors. As far as we are concerned, there is a strong buy signal being hoisted," Khiem Do said.

Urbanisation, particularly in China, has been a key driver of this growth. The total urban population in China is expected to double from 532 million in 2008 to 970 million in 2020.

With this comes demand for infrastructure, utilities and food, all of which will continue to play a major role in driving growth for the economy. The bank believes economic growth in China will remain robust, supported by government spending and domestic demand.

Asia is well positioned to lead the global economy out of crisis, according to Khiem Do, chair of the Asia multi asset team at Baring Asset Management (Barings).