International | Jun 14 2006
By Terry Hughes
The correction is unlikely to be over yet, ABN Amro analysts say, advising Asian investors to sell into the expected upcoming bounce.
The bounce is expected in the next week or two, caused by short covering, the analysts predict, and with fund redemptions not yet running their course, they say it is most definitely a bounce to sell into.
However, they caution on potential redemption, particularly by BRIC funds (oriented at markets in Brazil, Russia, India and China), as they could hit China and India hard. Indonesia is also a "stay away" due to its sensitivity to fund redemptions.
The broker is overweight domestic-orientated and defensive markets such as Singapore and Hong Kong.
Although the valuation of Asia ex-Japan is now seen as being back to "reasonable levels" the analysts say a continuation of the correction would not surprise them.
However, even if a 2Q04-esque correction were to eventuate, cutting a further 10% of the market, the analysts say this would still not imply a bear market, particularly in light of what they say are solid corporate balance sheets and "sound external balance of payments positions."
