Even as Asian fund managers have upped their cash levels, Asian stocks appear to be under pressure. The MSCI Asia Index fell sharply by over 2 per cent in intra-day trades on Monday, though it recovered by the close of the trading session.
Investors are anxious that the weakening global economy will hurt profits. In fact, as the world’s largest exporter, it’s surprising that Asia’s markets haven’t taken more of a hit.
Perhaps, it’s because they have already lost so much – being the worst performing region worldwide. That has actually prompted some global funds to add some exposure to this market.
For instance, global funds are putting money into India and Asian fund managers too are now less underweight on India and China. In contrast, weightages for Korea and Taiwan have been reduced. However, that hasn’t been enough to offset selling pressures in the Indian market as foreign institutional investors pulled out just over $7 billion between January and August this year. Nonetheless, compared with June and July, outflows in August have been a modest $ 300 million.
Analysts at brokerage Citi, however, believe that Asian fund managers could sell into any rally and increase their cash positions before re-investing in the next bull phase. One reason for this is the lower earnings forecasts; for some countries such as Taiwan and Malaysia, earnings could actually fall in CY08.
For India, the Sensex earnings are now tipped to grow at a lower16-17 per cent — down from 20 per cent earlier.
