Buying The Unloved in Asia

by James Gruber on December 7, 2012

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{ 6 comments… read them below or add one }

Kevin December 26, 2012 at 10:58 pm

Just a crazy theory (pure speculation), but could they raise financing from the Japanese public due to growing nationalism stoked by Senkaku/Diaoyu (and not to mention legitimate claim, Dokdo)?

In the article I read about Indonesia, the increase in minimum wage was received positively by the everyday man because that meant being able to finally afford housing loans. The article didn’t talk about the flip side from the business perspective, but it might be worthwhile to follow how credit availability develops there.

I’d be a buyer of consumer names if there’s an opportunity.

Kevin December 26, 2012 at 8:23 pm

What’s that phrase, the road to hell is paved with good intentions.
What Japan wants is no different from any other government. It’s been stuck in a deflationary environment for the last 20 years while its debt has ballooned. The Japanese have given Abe his mandate, but what gets promised in elections may not transpire in reality after a while.
There are certainly interesting things in Japan, ie certain industries are divesting certain assets and positioning themselves in food. FIT also makes renewables interesting. BUT, the main worry about Japan is the structure of the balance sheet and yen risk.
When they default, equities are going to get dumped, which may be a great time to pick up some. The BOJ is stuck for a reason, and Abe may or may not realize it (I’m sure he does, but he’s probably pushing the envelope).
Watch rates for your Japan plays. If the spreads go up, they can’t finance bonds.

James Gruber December 17, 2012 at 7:58 pm

Kevin,

That is true for 2012 though Indonesia substantially outperformed the rest of SE Asia in the two years prior.

It is expensive versus the rest of the region.

In my view also, the economy remains over-reliant on commodities, explaining a large part of the boom in Indonesia over the past decade.

Lastly, economic reform has stalled under the current government – this has been overlooked while the economy has thrived but won’t be when it doesn’t.

So, I would suggest that Indonesia and the Philippines are most vulnerable to a correction from here.

Keep in mind too, SE Asia has attracted large inflows from institutions, who’ve deserted North Asia over the past three years. That will change at some point, and it may be about to happen now as China rebounds from its lows.

James Gruber December 17, 2012 at 7:45 pm

Kevin,

I must profess little expertise when it comes to Mongolia. I hope to get better informed on it soon.

Kevin December 16, 2012 at 9:54 pm

However, I might add that the Indonesian market hasn’t appreciated as much relative to other SE Asian markets.

Kevin December 16, 2012 at 9:41 pm

Haha. They did the same in Mongolia through a purchase and it marked the top (so far at least..but who knows in the future)
Do you have any views on Mongolia?

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