Published January 21, 2009

Bank sees most of Asia hitting bottom in Q2

Region's gradual recovery to fuel sustained stock rebound in H2


MOST Asian economies are likely to hit bottom in the second quarter of this year and then begin a slow recovery, analysts from Credit Suisse's private banking division said yesterday.

Fan Cheuk Wan, head of Asia-Pacific research for Credit Suisse Private Bank, said the expected recovery will fuel a sustained rebound in Asian equity markets in second-half 2009.

The bank is telling clients to pick stocks most likely to benefit from China's plan to spend four trillion yuan (S$883 billion) in 2009-10 on infrastructure projects and social programmes to help its poor.

These aggressive measures to stimulate the economy, including efforts to expand bank lending by cutting interest rates and bank reserve requirements, mean China will lead Asia's recovery from the downturn, said Credit Suisse's Asian chief economist Joseph Tan.

'It's not just the size of the stimulus package but the speed and the willingness of the authorities' to act to save jobs and prevent social unrest that will sustain China's growth at 8 per cent this year, he said.

Also, the central control exerted by the Chinese government gives it the ability to push out new loans to businesses and people quickly - a task that governments in the US and Europe are struggling with, Mr Tan said.

Overall, Ms Fan said investors should adopt a 'defensive' strategy for the first six months of 2009, buying stocks and bonds of firms that are cash-rich and do business in sectors such as utilities and consumer staples, which are most likely to survive the recession well.

'Although we expect a short-term one to three- month equity rally, we recommend investors stay cautious and position themselves in companies that are cash-rich,' she said.

The next few months will probably bring more nasty shocks for stockmarket investors, as analysts cut their earnings forecasts further after the latest results reporting season, she added. But by the end of Q2, the outlook should look cheerier.

'We expect a trough for Asia economic growth towards the end of the first half, then a slow recovery,' she said. This will support a rebound in Asian equity markets in the second half.'