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Asia – A Solid Prospect

Asias growth drivers remain intact
After a near-decade of sterling growth, Asia remains on a firm footing. Developing Asia averaged an impressive 9.0% growth between 20032010, double the global average of 3.8%. Asias newly-industrialised economies (NIEs) also expanded robustly, at 4.3%. Emerging powerhouses China and India remain key drivers, while Vietnam is a growth engine of the future. China overtook Japan last year as the worlds second largest economy, and is anticipated to become the worlds largest by 2020.
Positive domestic and external factors to support the region
Asia’s strong performance is grounded in firm fundamentals, including steady income growth, rising employment and consumption, and diversification from traditional manufacturing into new growth engines, particularly services. Much of developing Asia is characterised by a younger demographic profile, which is creating new catalysts for growth as they flock into cities in search of employment and new urban lifestyles. These structural drivers have attracted foreign investment, making Asia a key player in global trade and finance. The regulatory environment has also seen dramatic improvement. More than a decade after the Asian financial crisis, safeguards and corporate governance standards have been enhanced, yielding greater financial stability.
Investment opportunities abound
Against this backdrop, Asia provides a solid platform for global property investors. The global recovery, following the US subprime debacle, remains fragile as the Western economies climb out slowly from low levels of economic activity. However, Asias prospects remain bright. The region has continued to see vast inflows of global capital, even as much of the western world grapples with a tightening credit squeeze.

Real estate markets in Asia have generally recovered accordingly. The excess liquidity in Asia has prompted some authorities most notably in China, Hong Kong and Singapore to quell speculative pressures. However, the impact is expected to be one of containment rather than cessation. Positive structural factors have opened up real estate capital markets, such as the development of REIT structures in emerging markets, better transparency and favourable tax and regulatory changes. Development of the services industry has induced new demand for commercial and retail space, while the continued influx of expatriate professionals will sustain demand for luxury housing in many markets. In summary, opportunities abound in Asia for investors seeking better returns coupled with relative stability.

   IMFs definition, referring largely to developing countries in East Asia
   NIEs: Hong Kong, Singapore, South Korea, Taiwan

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Dec 2010 Asian Property Outlook & Strategy – December 2010