Readers will recall that last year we offered a case of champagne for the person who could best predict where the FinanceAsia 100 blue chip index would end 2004. We received a wide range of entries by email, with the most bearish forecasting 975 and the most bullish forecasting 1818.
We specified that December 17 would be our closing date for the competition and the index closed on that date at 1,279. Congratulations go to Alastair Macdonald, the head of research at Finansa in Thailand, who predicted the index would finish the year at 1280 and beat the next nearest forecast of 1284. He wins a case of champagne.
In terms of total return the index was up 14% in 2004 and had a decent year.
So what of 2005? We repeat our competition this year, and ask you once again to forecast the FinanceAsia 100's closing level - this time on December 16th. Entries should be emailed to [email protected] before the end of January.
For help with your predictions, you may find our outbound 72 page Guide to the FinanceAsia 100 useful - which comes with the December/January issue of FinanceAsia magazine. This breaks down the index in every imaginable form, and will help you understand the sectoral and geographic components that drive the FA100.
For example, the index, which ranks the region's 100 most profitable companies, has a strong tech element - so your views on the tech cycle are very important to the overall direction of the index. And likewise, if you feel that the Korean consumption story is about to turn the corner, this is also highly relevant, since Korea (with 18 members) is the country with the single largest number of stocks within the FA100.
Beyond these factors, there are obviously some major macro-economic trends to watch. The weakening US dollar will have a meaningful impact on the region - and likewise whether China chooses to revalue its currency. Some doomsayers predict the dollar's decline will lead to a full blown currency crisis.
Meanwhile, the general consensus is that the US economy will be weaker in 2005 as tax stimulus recedes and the US consumer has to come to terms with their indebtedness. That is bad news for the global economy, as a weaker US economy will certainly dent global and Asian growth.
On the other hand, the weak US dollar and poorer returns at home could lead portfolio managers in the US to move more money into Asian equities - and as the index of Asian blue chips, the FA100 will be the first beneficiary of such an allocation trend.
In Asia itself, the Japanese and Chinese economies will be key economic stories to watch. Can Japan's economy sustain its growth momentum - or has it already stalled - and will China's seeming soft landing keep the region ticking along? Both would be very positive for the FA100.
All in all, the year ahead looks like it could face some challenging headwinds. Good luck with your predictions.
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