The short answer is "no", according to Bloomberg columnist Andy Mukherjee in today's piece, Asia's Growth Is No Foil for Vanishing Money. In the wake of a global liquidity squeeze, the risk of further falls in equity markets cannot be discounted:
A slightly longer answer is that this may not be the time to get swayed by long-term economic fundamentals of Asian emerging markets. Expectations of strong growth alone may not be much protection in the face of disappearing liquidity.
Assets in mature Asian markets -- a property in Singapore, for example -- may not be all that sexy; they may, however, be a better bet right now than software company stocks in India. True, stock-market gyrations apart, the real economy in most developing Asian nations is doing very well.
The only big exception is Indonesia, where there's a risk of stagflation. PT Astra International, the nation's biggest motor- vehicle retailer, now expects Indonesia's combined new car sales to decline as much as 44 percent this year.
One growth hot-spot is India. The Indian economy will expand 7.7 percent in the current fiscal year ending in March 2007, the National Council of Applied Economic Research in New Delhi forecast last week. Assuming normal rainfall and food production, the slowdown in the pace of economic expansion -- from 8.1 percent in the previous year -- will be marginal, and largely a result of the monetary tightening that must now occur to combat inflation.
Just because growth has a solid footing, it doesn't follow that the recent 17 percent slide in equity prices over eight days has taken all the froth out of valuations and that the Indian market is an ``opportunity to buy'' for small investors, as Finance Minister P. Chidambaram said last week.
Winnie Ma and other researchers at Nomura International (Hong Kong) Ltd. said in a May 22 report that the Sensex, India's benchmark equity index, may have a ``fair value'' of 7000 points. It closed last week at 10,809.35, having recovered some 3 percent from its May 22 close. This rally is too risky for small investors to start buying again.
Watch the rupee. A combination of falling currency values and rising short-term interest rates would indicate that ``risk aversion is rising, liquidity is being withdrawn faster than the authorities can introduce money, while foreigners would be more likely to be repatriating funds,'' the Nomura researchers say.