Asian Investment Provide Diversification

Asian Provide Investment Diversification
Having looked at the possible developments in China, the latest news from the rest of Asia is not good. Industrial production in Japan fell more than 8% in November, the biggest drop in 55 years. It is also expected that Toyota (TM) may report its first loss since the Second World War. According to a report from Bloomberg:

    Japan's economy probably will shrink at an annual rate of 12.1 percent this quarter (ended 8 December), the largest drop since 1974 as the collapse of exports ...

    "We expect a negative growth will continue for a fifth straight quarter for the period April to June 2009."

    Companies surveyed said they plan to reduce the production of more than 8 percent this month and 2.1 percent in January. Exports fell an unprecedented 26.7 percent last month from a year earlier.

    The data have led many economists to revise their projections of GDP. Bank of America Corp. now predicts a contraction of 6.5 percent annualized drop of 2.7 percent previously estimated.

The around 90 yen to a dollar is high and 13 years Japan has emphasized export woes.

As U.S. consumers cut spending and Europe is hitting countries like Taiwan and Thailand, plus China and Japan the excess capacity were built, and unless the situation stabilizes in the U.S., the ability of these countries are going to find it extremely difficult. If the U.S. stimulus does not work for some reason, these countries are going to find it extremely difficult. As a U.S. company and leveraged credit based on a cash flow basis, the absorption capacity in excess can also take time.

competitive devaluation can also begin. Japan has indicated it intends to take measures to prevent the yen rising. He said:

    Japan was ready to intervene in the forex market for the first time in four years. With the economy already in recession, along with the U.S. and Europe, the yen is surging upward pressure on exporters ...

Most countries in Asia, excluding Japan, is expected to see inflation or low inflation and not deflation. A report from Morgan Stanley:

    ... It is notable that Singapore and Indonesia are the two ends of the spectrum of inflation. The open nature of the economy more vulnerable to the accumulation of slack, and consequently, reduced pricing power. Furthermore, the correction of the housing cycle is likely to appear in the CPI as lease agreements for replacement with a lag. In the recessions of 1998 and 2001 when GDP growth was -1.4% and -2.4%, respectively, were three to four quarters of deflation. We hope that the negative inflation over 2H09.

Countries that have economies driven by deficits are those who will be affected more often than decreases the global liquidity and the flow of foreign capital reduces in comparison with the past was leveraged.

It appears that diversification strategies will not be easy to implement in 2009.