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Wednesday, May 17, 2017

3 Must Read Asian Market Stories: Japan’s Growth Spurt, China’s Silk Road, Frontier Markets Investing

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The focus will sharpen on Japan’s economy with Thursday’s release of March quarter GDP, but the world’s third largest economy is on track for its longest growth streak in more than a decade.


Shinzo Abe, Japan’s prime minister.
Photographer: Tomohiro Ohsumi/Bloomberg

Bloomberg has the details in a story that looks at how Japan’s economy is benefiting from a weak yen, noting that economists expect a year-on-year increase in GDP of 1.7%. Here’s a taste of what Bloomberg has to say:

While Japan’s failure to spur inflation continues to generate angst about the nation’s future, gross domestic product data this week is likely to show that the economy has still managed to eke out five straight quarters of expansion.

That would be the best run since 2006, during Japan’s last period of political stability under the leadership of then-Prime Minister Junichiro Koizumi.

Thanks to a strong showing from exporters — aided by a yen that’s back at the more competitive levels of a decade ago — Shinzo Abe’s government is set to better Koizumi’s run later this year.

As investors continue to digest the long term impact of China’s One Belt, One Road project following last weekend’s summit of world leaders in Beijing, The South China Morning Post has an interesting story on Five Things to Watch As China’s Belt and Road Plan Unfolds. Here’s a little taste of one of the things to watch:

After the two-day summit, China still needs to address lingering scepticism in different countries. The US and Japan have expressed doubts about the belt and road scheme, but they sent representatives to the summit. India boycotted the forum over a dispute about the China-Pakistan Economic Corridor passing through Kashmir.

Another setback was the decision by several European countries, including France, Germany and Britain, not to sign a trade statement at the summit. They said the initiative was not clear on public procurement or social and environmental standards.

Emerging markets are back in the spotlight, with Daniel Shane writing an excellent story in last weekend’s print edition of Barron’s. But investors shouldn’t forget about frontier markets, the riskier cousins of emerging markets. Reuters has an interesting story looking at the strong returns so far this year and relative valuations. Here’s a a sneak peak:

After years of sub-par returns, frontier markets started 2017 strong and are getting fresh looks as U.S. valuations look steep and emerging markets have been on an explosive run.

The S&P 500 index trades at a heady 21.35 price-to-earnings ratio, compared with the MSCI International Frontier Market Price Index’s 13 P/E. Fund managers say while they don’t buy with a particular P/E in mind, frontier’s ratios are generally some of the cheapest in global equity markets.

May 17, 2017 at 07:29AM

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from Robert Guy

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