As 2003 began, it was not immediately obvious to everyone that Asia's equity markets would enjoy such a strong rally - pretty much across the board.
Our own FinanceAsia 100 blue chip Index began the year at 920, before plummeting to close to 800 thanks to SARS, and ended the year at 1122. That marks a 22% performance for the year - not including gains from dividends. It began 2004 at 1173.
We therefore invite readers to submit their prediction for where the FinanceAsia 100 will end up on Friday, December 17 2004. A case of 12 bottles of champagne will go to the winner, who will be the person that comes closest to the final level of the index with their prediction.
Submissions should be an exact number (eg 1123) and not include decimal points, and be made to [email protected]
It is likely to be a challenging year to predict. As can be seen from our interviews with Asia's top fund managers in the December issue of the magazine there is no firm consensus on 2004.
Key markets - and key constituents of the FinanceAsia 100 - such as Korea and Taiwan are particularly challenging to predict. Korea, on the face of it, deserves a massive rally, since it trades at one of the world's lowest PE multiples and increasingly has some of the world's best companies. However, foreign ownership in Korea is already incredibly high and it will only be when Koreans themselves rediscover confidence in the market that it starts to surge.
Taiwan's market will be dictated to a large degree by the high profile presidential election that looms. Many think an upward trajectory is guaranteed, at least until the election. Indeed, elections all round Asia (Korea, Malaysia, India, the Philippines, Indonesia, and Thailand) as well as in the US, will dominate the year, and the outcomes of those elections will drive sentiment.
Likewise on the sentiment-front, the recent mania-like subscriptions to China IPOs may lead some to worry of an impending bubble; and a SARS resurgence would also be a big problem.
The big wild card for 2004 is the US dollar. Its steady collapse against the yen, sterling and the euro (as well as against some Asian currencies) is worrying, especially if the loss of confidence in the greenback gets worse in 2004. What is significant is in the last 20 years the US has gone from being a net creditor nation to the rest of the world to being a net debtor, and it is this fact that has led Nobel Laureate economist, Robert Mundell to become so concerned about the US's deficit and a future dollar crisis.
Of course, a full blown dollar crisis would be a major shock to the global economy (given its status as the world currency and backbone of confidence in paper money), and Asia would feel the chill winds, as confidence retreated.
Good luck with your predictions.
