Asia baffled by stasis in Eurozone, says Nikko’s Charles Beazley
No market or region is immune to regular market knocks, but what has shocked Asian investors is the seeming inability of eurozone authorities to get to grips with their problems.
Asian investors are interested in three things at the moment: yield, safety and growth, says Charles Beazley, head of international & institutional business at Nikko Asset Management.
“Europe is a bit baffling for them. It is a confusing picture. They feel that all the statements and indicators coming from the region seem to be inward looking, as if Europe is not interested at the moment in the wider world. But the wider world is interested in Europe, and in where the European Union wants to go.”
At the financial level, Asian investors hear a similar story from most European banks, who talk of shrinking balance sheets and adequate capital reserves. But from the outside, it appears there is considerable overcapacity and uncertainty, and a tiredness, a lack of will to address problems.”
This does not mean there is no sympathy for the challenges faced at national and corporate level. Asia itself went through a financial crisis too recently to indulge in schadenfreude. Japan is still reeling from the effect of the earthquake on 11 March, which centred off the Pacific coast of Sendai on the island of Honshu, 130km from Tokyo.
Not as bad as it looks
However, Japan’s economy is not as stricken as some outsiders portray it to be. “The earthquake, and subsequent fallout, was catastrophic and appalling but the worst damage was mostly in coastal agrarian and fishing villages,” notes Beazley. “And the reaction has been for the whole nation to come together to rebuild with collective stoicism and determination.”
That response underlies general astonishment at Europe’s inaction and continued bickering through what is clearly a crisis of similar dimensions, even if it is financial rather than geological. In Japan, corporations were asked to reduce power consumption by 18% over the summer to take the strain off the national power grid. They did so, rising to meet a considerable production challenge.
Despite the upheaval of the post-quake months, coupled with the deteriorating global economic environment, Japanese companies are generally solid, trading at realistic multiples, with the currency still at manageable levels, despite recent appreciation.
Beazley, who moved to Tokyo last year after hiring Charlie Metcalfe from First State Investments to take over as head of Nikko’s EMEA business, says the asset management industry in Asia – centred around Hong Kong, Japan and Singapore, is watching and learning from other regions.