Investors peer past gloom, eye Asian economic rebound

Mon Feb 13, 2012 9:09am EST
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By Nick Edwards

BEIJING (Reuters) - If the World Bank is correct, 2012 will see the second slowest year of global economic growth in a decade, at a level consistent with a world recession that, like the 2008/2009 financial crisis, would not spare Asia.

Its sister organization, the International Monetary Fund, warns that economic expansion in China could be slashed in half this year if Europe's debt debacle worsens -- grim news given that China adds more to global growth than any other economy.

And around 600 of the world's best private sector economists polled by Reuters say global growth momentum is disappearing, along with their more robust estimates for Asian expansion.

So why have investors bought emerging Asian equities so enthusiastically that stocks outside of Japan have just had their strongest January showing since 2001 to enjoy one of the 10 most profitable monthly returns in a decade?

"In summary, much of Asia is in a sweet spot right now," Robert Prior-Wandesforde, director of non-Japan Asia economics at Credit Suisse in Singapore, told Reuters.

"Survey data clearly indicate that the world trade cycle is taking a turn for the better which is likely to show through in better Asian export and industrial data shortly," he said.

"History suggests that an improving growth and inflation mix is strongly associated with a better market performance. This is exactly what is happening right now," Prior-Wandesforde added.

Sweet spot or not, given the external headwinds emanating from deficient demand in the debt-ridden European Union and still under-spending consumers in the United States, investors certainly appear to believe in Asia's rebounding economic cycle.   Continued...

<p>A floor trader monitors share prices inside the trading hall of the Hong Kong Stock Exchange, August 11, 2011. REUTERS/Tyrone Siu</p>