An Investor’s Tour of Asia

09/04/2008 12:00 am EST

Focus: GLOBAL

David Fuller

Global Strategist and Producer, Fullermoney

David Fuller of Fullermoney takes a wide-angled look at the continued potential of Asia's markets.

Shock waves emanating from the burst bubble of the US's credit expansion reach all countries, due to the size and influence of the US economy. Nevertheless, if we take a long view, the post-World War II global economic boom is due to far more than just the money and credit which in excess, inflate asset markets. We can also point to a more stable political environment, far greater cooperation among nations-despite numerous small wars and terrorism-and improving economic governance in developing economies.

While some countries have suffered from a self-induced lapse of good governance at numerous levels, many more nations are improving in this respect. Needless to say, this has a dramatic impact on relative performance.

For instance, Singapore (Straits Times Index, 2,691-Editor) has consistently demonstrated the best overall economic governance since it became an independent nation in 1965. Investors were amply rewarded, particularly during the economy's emerging decades.

An important question for investors today: which larger countries have shown the best economic governance over the last decade or more and appear capable of extending this successful process?

In terms of top-down leadership, China (Shanghai Composite Index, 2,467-Editor) is the runaway leader, even with its one-party rule and authoritarian capitalism. However China did not invent the template for its economic prowess. Deng Xiao Peng, who opened the door to China's economic success, borrowed it from Singapore's founder Lee Kuan Yew.

Modern China is Singapore writ large. Long-term investors in China will do exceptionally well relative to most other stock markets in the decades ahead. It will be a roller coaster ride. However, investors who look at China today can be reasonably confident that its stock market is near the trough of this cycle.

For corporate governance, India (Bombay Sensex Index, 14,048-Editor) is the leader, at least in terms of its top international companies. India's modern management skills have been honed for decades on the shop floors and in the board rooms of successful companies all over the world. Its administrative prowess was similarly developed in civil service rolls on five continents.

Today, India's own companies are increasingly benefiting from this wealth of managerial experience and talent. In terms of economic development, India is at least 15 years behind China. Consequently it probably offers investors even greater long-term potential.

Vietnam (Ho Chi Minh Index, 548-Editor) is another outstanding long-term investment prospect. Interestingly, it has been one of the best performing stock markets since its June low, but needs to hold above 500 to avoid more extensive base development. That may be a big [thing to] ask in the current environment.

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