Greece’s sovereign debt crisis has plagued Europe and shaken market confidence, but it has also strengthened the case for Asia as a long-term investment destination.
“Until a few years ago, Asia was considered a risky place, where you look for yield and when things are good, you look outside into emerging markets. Now, Asia is a much sounder place than other parts of the world,” Rajeev De Mello, head of Asian investment for Western Asset, which has some $482 billion under management.
De Mello believes the $1-trillion eurozone emergency plan will result in more money finding its way to Asia for higher returns. He is looking to add to his overweight position in Indonesian local sovereign bonds after yields shot up to one-month highs last week and has a positive view on South Korean government debt.
Underlying a bullish case for Asia are improving economic fundamentals that will mean less government borrowing and more stability in face of crisis.
Between 2008 and 2009, Asia improved in a ranking of economic strength by Thomson Reuters Datastream. In 2008 when the financial crisis truly went global, three of the top 10 countries were Asian. A year later, China, India and Malaysia took the top three spots.
Spain became the latest euro zone country to announce sweeping austerity measures — slashing civil services pay and axing 13,000 public sector jobs. The country reported a 0.1 per cent growth, exiting recession. Germany and France also reported paltry growth — 0.2 per cent and 0.1 per cent. Italy reported a 0.5 per cent rise in GDP for the January-March quarter, while the Netherlands’ GDP grew 0.2 per cent quarter-on-quarter.