Foundation & Endowment Money Management - Asia Seen As Recession-Buster

Asia Seen As Recession-Buster

Asian countries and businesses have weathered the financial crisis better than their Western peers, prompting nonprofits to consider diversifying into the region. FEMM Contributing Reporter Joseph D'Allegro recently spoke to Andy Iseri, an investment consultant specializing in international and global equity at Callan Associates; Aaron Costello, a global investment strategist at Cambridge Associates; and Scott Mather, a managing director at PIMCO and head of its global portfolio management; about investing in the Far East. Although they agree that Asia is a volatile bet, it's quickly becoming a necessary part of diversification. What's still up for debate is which countries are attractive in the medium and long term.

FEMM: Why should a nonprofit invest in Asia?

Aaron Costello Costello: Asia will continue down the path of economic development; the region's financial markets are underrepresented relative to their economic size. For instance, Asia, excluding Japan and Australia, accounts for roughly one-fourth of global GDP adjusted for purchasing price parity, while Asia ex Japan equities account for less than 10% of the market capitalization of the MSCI AC World Index. Secondly, while the emerging middle class story is well known, approximately two thirds of the world's population resides in Asia. Rising living standards and consumption in Asia should remain a driver of economic growth over the coming years. Finally, Asian corporations, households, and governments have substantially lower debt levels than their western counterparts, especially the latter two, which we see as a source of inherent strength for the region going forward.

Scott Mather Mather: Developed nations entered the crisis with excessive levels of leverage, especially in their private sectors. During the crisis large fiscal deficits and expanded central bank balance sheets led to a rapid growth of public sector indebtedness. In contrast, much of Asia exhibited lower debt levels among the public and private sectors, favorable budget positions, current account surpluses, healthy domestic savings and large international reserves. These stronger initial conditions facilitated both fiscal and monetary policy responses as well as a shift towards domestic demand to substitute for the withdrawal of export-led growth, producing a relatively quick recovery relative to developed countries. Higher public debt loads ...

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Asia Seen As Recession-Buster

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