The US and European economies are in much worse shape than the Asian economies. Asian banks did not participate, for the most part, in the sub prime debacle. In addition, Asians have been prodigious savers after the Asian crisis in the late 90s. The recent financial turmoil has soured Asians view of US investments and US banks.
For now, though, Asian interest in American assets is wilting, a trend that seems to have started over the summer.
Little-noticed data released by the U.S. Treasury Department on Tuesday showed that a sharp shift in international capital movements began in July. Private investors pulled a net $92.9 billion out of the United States, after putting $46.8 billion into American securities in June.
Many investors in Asia think that Asian economies will bounce back from the global economic downturn faster than the American economy, said Henry Lee, the managing director of the Hendale Group, a well-known Hong Kong investment advisory firm. So they are putting their money in Asian companies.
“When the dust settles, I think Asia will come out ahead of the U.S.,” he said.
Will Asia recover first? Asia depends on the US for a lot its growth so their economies will certainly be hurt by a US slump, but with a vast pool of savings, they are in a much better position to weather the storm. Asian markets have suffered every bit as much as the US markets so it hasn’t been a safe haven, but when things settle down, those markets may be the first to come back.
Asian companies have been big buyers of their own stock already this year. Now some believe the wealthy families that dominate the Asian markets will use the recent selloff to take their companies private:
Investors grappling with Asia’s whirling stock markets might want to watch the tycoon families that control many of the region’s publicly traded companies.
Many companies in Asia, outside the more developed markets of Australia and Japan, are controlled by families whose fortunes could be put to work taking companies private if they feel prices have fallen low enough.
The families may well be considering buying out such assets, investors and investment bankers say. If they do, that could be a sign that stocks have hit bottom.
Asian companies tend to have smaller portions of equity in the public market than Western peers, making buyouts more feasible. In Asia, such moves are “an option that is not available in the U.S. and Europe,” says Michael Gordon, global head of institutional investment at Fidelity Investments International Ltd.
Asia’s families didn’t wield the same financial firepower during Asia’s last big market slump a decade ago. But company balance sheets today appear far more disciplined, so Asia’s family buyers may not worry as much about shouldering large debt burdens.
I am a little skeptical of this thesis because Asia is so dependent on US exports for growth, but this bears watching.