COMMENTARY
Commentary: Emerging Asia Inspires Investor Confidence
July 23, 2009
Christopher Bjorke

As the end of the recession slowly approaches, investors are feeling the most confidence about Asia and finding cause for worry in Europe and the United States.

A recent Bloomberg poll found global investors most optimistic about the prospects of India and China, with two-thirds of those polled reporting optimism in India and 70 percent for China’s prospects.

Similar numbers in the poll showed doubts about Western economies and Japan, with 67 percent of respondents taking a negative view of Western Europe and 62 percent and 55 percent expressing pessimism about Japan and the U.S., respectively.

India and China’s growth rates tower about the West’s weak numbers, too, with both countries expecting growth above 7 percent this year. India’s stock market has also surged in recent months while the country’s business environment has been helped by the reelection of the Congress Party, which favors economic reform.

China, meanwhile, has defied doubts about its predictions for yearly growth and has come close to meeting its goal of 8 percent expansion for 2009.

Resilient Asia

The optimism surrounding Asia and its ability to shake off the economic crisis revives the idea of decoupling—that the developing world’s economies are no longer determined by the performance of the Western ones.

“The overall pattern is that this global recession is worse than the 1982 for industrial countries (especially Japan, where output will fall 7 percent this year), but not as severe for Latin America, nor as severe as the late 1990s crisis for East Asia,” wrote William R. Cline of the Peterson Institute for International Economics last month.

As the recession passes, “emerging Asia will do the best, returning to 6 percent growth next year after keeping positive growth of nearly 4 percent this year,” Cline wrote.

The comparison between the Asia and the West in the current crisis is in dramatic contrast to the Asian financial meltdown of the late 1990s, when investor confidence in the region plummeted and rapid outflows of funds created economic ruin.

With the recession-riddled year of 2009 more than half over, Asia has demonstrated its ability to move forward despite what happens in the developed economies, in part due to its huge foreign reserve holdings available to fund stimulus investment. As investors emerge from panic mode and again go looking for growth opportunities, Asia will be an investment magnet as the West still works to fix its financial system and recover from the crisis.

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