They have benefited from a 17 per cent rise in the Taiwanese Stock Exchange this year as the Taiwanese Government deregulated the banking sector and moved to fix the bad debt problem. The Korean stockmarket has gained almost 3.5 per cent for the year, from very low levels, on the back of the merger of the two largest retail banks. Mr Series cautions that there are a couple of potential roadblocks that could mean the response of Asian stockmarkets is more muted this time. Asia is more exposed to the telecommunications sector than it was 10 years ago, although, he says, Asian telcos are very cheap and the influence of the sector is not as great as it was a year ago. Mr Dominic McCormick, research manager at Bridges Financial Services, says investors have to keep in mind that Asia is a risky sector.
Investors have to be careful though.
Whenever the US is doing well, Asia does even better. But the opposite is also true, as the graph shows, when the US economy overheats and the Fed raises rates, Asian stockmarkets are the first to tumble. Investors should not lose sight of the fact that the Australian market has held up well and should outperform the US market, given that it was not prone to the same speculative excess, he says. Free index have delivered about the same total return, but the Asian ride has been a lot rockier. And with the Australian dollar at historic lows against the greenback, there is the risk the Australian dollar will rise in value against the greenback and therefore against Asian currencies.