By Kang Seung-woo
Investment capital is likely to flow back into emerging markets from next month, a British expert said Tuesday.
“We have a very big investment conference every year for Asia in Hong Kong, where we have about 2,000 investment clients and about 300 corporations across all sectors and all countries in Asia and we carried out a poll on ‘At what point do you see fund flow going back into emerging Asia from the developed (countries)?’ and 75 percent of the room felt that it would happen in two months,” Osama Abbasi, CEO of Credit Suisse Asia Pacific, said in an interview with The Korea Times.
“The conference was on March 21, so basically the general view was May 21, meaning you will see money flow into emerging Asia rather than out of emerging Asia.”
According to him, there were about $8 billion to $10 billion of fund outflows from emerging Asia into the developed markets of Japan, Europe and the United States in the first six to seven weeks of 2011.
However, he remained cautious in predicting how long the trend will last.
“It is very hard to have a view on the time frame. Korea is seen as an overweight asset for investment opportunity and people invest in Korea, but things tend to go in cycles. It is very rare to see any stocks and any country and any asset class just have a straight 45 degree line up,” he said.
Abbasi said that Korea, Asia’s fourth-largest economy, is an attractive place for investment.
“Korea is our biggest overweight buy. We think Korea has great value,” he said
“When you look at the market, you look at valuation, future earnings and relativities. So those are the absolute terms for the market and for those reasons, Korea is well positioned.”
He added that soaring inflation is not likely to worsen.
“The general view is that food price inflation, which is a very big component of inflation, is pretty much capped out. We feel that further acceleration in food inflation is unlikely from here. As for commodity prices, it is very hard to call due to geopolitical situations in the Middle East,” he said.
“Although it has been turbulent and maybe there is more to come, it is unlikely any material event will take place that would send oil (prices) a lot higher.”
The soaring consumer prices are posing a threat to the government and policymakers, as the country’s inflation jumped 4.7 percent in March from a year earlier, surpassing the upper ceiling of the Bank of Korea’s 2 to 4 percent inflation target band for three months in a row.