Asia Can Escape Global Crisis, Morgan Stanley Says

By Chan Tien Hin

Nov. 6 (Bloomberg) -- Asian stock markets and economies can escape the worst of the global downturn, with China, Hong Kong and Taiwan best placed to ride through the turbulence, Morgan Stanley said.

Equity strategists at the brokerage added to their ``overweight'' position in Taiwan in their model portfolio of stocks and raised South Korea to ``equal-weight'' from ``underweight,'' a report today said. Malaysia was cut to ``underweight'' from ``overweight.''

``Asia's fundamentals are far stronger,'' analysts Malcolm Wood, Ryan Tsai and Corey Ng wrote. ``A combination of easier monetary and fiscal policy and lower commodity prices should enable Asia to avoid the worst of the global downturn.''

China and Japan have slashed borrowing costs in the past two weeks to ease the economic fallout from the global credit crunch that is pushing some countries into a recession. The turmoil, which caused the collapse of Lehman Brothers Holdings Inc., has frozen credit markets and triggered a worldwide rout for equities, wiping out more than $25 trillion of market value this year.

``If the worst of the global liquidity crisis is behind us, macro strength is probably going to become a key market driver,'' the report said. ``This should favor Greater China. A key difference between Asia today and in 1997-98 is the emergence of China as a key driver of growth.''

Cutting Rates

China's growth will slow to 9.3 percent in 2009, from 9.7 percent this year, the World Bank last month, predicting that the country is well positioned to withstand financial market turmoil. The central bank cut interest rates for the first time in six years on Sept. 15, following up with two more reductions since. On Oct. 29, the key one-year lending rate was cut to 6.66 percent from 6.93 percent.

China is the ``strongest'' to cope with the global slowdown while Australia, Malaysia and India ``face challenges,'' Morgan Stanley said.

Malaysia's ``external macro exposure and limited policy flexibility'' makes it vulnerable to the global slowdown, the note said. South Korea's upgrade comes as Morgan Stanley added Samsung Electronics Co. to its portfolio, saying Asia's biggest maker of chips and handsets is ``best positioned'' to ``enjoy earnings growth into 2010.''

On Oct. 7, the International Monetary Fund said the world economy would expand by 3 percent in 2009, paring the 3.9 percent forecast made in July. Emerging markets will account for 100 percent of the global economic growth next year, mainly Brazil, Russia, India, China and other Asian economies including South Korea, the IMF said yesterday.

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