Asian equities to star in 2007: AMP

Shane Oliver

The Asian equity market excluding Japan is the asset class that will deliver the strongest returns in the coming year, according to the chief economist of AMP Capital Investors.

“We’re looking for Australian shares returning about 14 per cent, this is a total return with capital growth of about 10 per cent, global equities around 12 per cent depending on what the Australian dollar does, and Asian equities around 18 per cent. So Asian equities will be a star performer,” said AMP Capital Investors head of investment strategy and chief economist Dr Shane Oliver.

He cited several different reasons for his confidence in this sector in the next 12 months.

“Dividends on Asian shares are about 20 per cent, so they’re actually higher than those in the US,” Oliver said.

“PE [price earnings] ratios on Asian shares are lower than they are globally. Globally you’re looking at something like 14.5 per cent and in Asia it’s about 13 per cent. The growth potential is a lot higher. Asia as a whole is typically generating economic growth of around 6 to 7 per cent, and China’s obviously a bit higher than that,” he added.

Oliver also feels Asia now represents a good low risk investment market because most of the economies are running trade surpluses, the budgets of these countries are in good shape and the related currencies are mostly undervalued.

In terms of an overall investment strategy, he expected that a portfolio made up of a 70 per cent growth allocation and 30 per cent defensive allocation would deliver a return of 11 per cent in 2007.