James Renwick,Special to The China Post
Asia will probably be the best region for investment in the second part of the year, according to Joanna Luxton, director of investment strategy at American Express, because of strong current account surpluses and improved domestic demand.
Speaking in Taipei yesterday on the investment outlook for the second half of 2002, she said that because of a recovery in exports following the resilience of the U.S. economy after the Sept. 11th terrorist attacks, the investment environment in Asia has the brightest prospects this year.
“The big difference between Asia now compared with pre-1997 is that domestic spending is finally picking up,” said Luxton.
“This is the only region in the world where we have really got fiscal and monetary stimulus keeping interest rates down, which may also bring taxes down.”
From a global perspective, despite figures which came out of the U.S. last week, global consumer confidence is likely to remain high, Luxton said, as long as interest rates remain at current levels.
Luxton added that interest rates are not likely to go up until Q4 when they may begin to rise only slowly. “We have seen the inventory cycle turning positive… what we need to see is capital investment picking up again.”
Interest rates will remain on hold until such capital investment picks up,” Luxton added. Expansion in the U.S. economy like the 5.8 percent seen in Q1 will be unsustainable. “Q1 growth was exceptional… we don’t see this as being sustainable for the next two quarters. GDP will hover around 3 percent,” said Luxton. On Europe, Luxton predicted a moderate upturn, but with growth weaker than in the U.S.
“Germany is lagging but the other countries are doing well.” Pockets of inflation, particularly in Spain and Irelan3d, are the exception and in most countries in Europe inflation will remain low,” Luxton said. The U.K., Luxton said, may raise interest rates before the rest of Europe because of uncontrollable inflation in property markets. In Japan, the Yen will remain relatively weak, said Luxton. Although the Japanese economy is set pick up, the problem is that the reform process is still too slow, so they will be back in the same position next year,” she added.