ABN AMRO Private Banking Likes Asia's Exporters; Frowns On India, Indonesia, Thailand

Tom Burroughes

18 September 2013

ABN AMRO Private Banking says it prefers to hold assets in China, South Korea, Japan and Taiwan, attracted by their status as exporters and due to their current account surpluses, while it frowns on countries running deficits, such as Indonesia, Thailand and India.

The Netherlands-headquartered bank, giving views on Asia and global economies in its fourth-quarter investment outlook, went on to say that it is holding to its “neutral” weighting on Singapore because of the stability of the Singapore dollar and strong current account surplus.

“The Singapore dollar should perform relatively well given that the Singapore economy is well positioned to benefit from a pick-up in global growth later this year and in 2014,” Roy Wellington Teo, senior foreign exchange and precious metals strategist at ABN AMRO Group Economics, said in the note.

He continued that the Singapore dollar is also likely to outperform against its South East Asian peers due to the country's healthier current account balance and large foreign exchange reserves.

The Monetary Authority of Singapore is expected, said, to maintain its bias in favour of a strong currency, to mitigate inflationary pressures in the city-state.

“The Chinese yuan (CNY) remains our top currency pick in Asia given China's strong economic fundamentals, current account surplus and large foreign exchange reserves. Besides its undemanding valuation, the CNY also has the low sensitivity to higher yields in the US and potential weakness in the Japanese yen,” Teo said.

Globally, the bank sees “accelerating, self-sustained economic growth” but does not see the US Federal Reserve moving to a tighter monetary policy until early 2015.

“The most interesting aspect of the current situation is not the potential impact of possible changes in US Federal Reserve policy, but the underlying forces of accelerating, self-sustained global economic growth. We have therefore reduced our cash position and further increased our exposure in equities – particularly in the SME sector and in companies which are in the engine room of this global economic recovery,” Didier Duret, chief investment officer at ABN AMRO Private Banking, said in the note.

For the fourth quarter, the bank’s equity theme is small- and medium-sized companies in the US and in Europe which are involved in the industrial supply chain or in optimising productivity levels.