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Why Overweight Southeast Asia? : Defensive

2001’s Unexpected Outperformer. Asia Stockmarket Relative Performance. 130. 110. 3. 90. Korea,Taiwan. 70. Safe Havens. ASEAN 4. Jan-01. Jul-01. Source: CEIC. Big Idea : Overweight Southeast Asia. Getting Exports In Perspective. Why Overweight Southeast Asia? : Defensive

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Why Overweight Southeast Asia? : Defensive

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  1. 2001’s Unexpected Outperformer Asia Stockmarket Relative Performance 130 110 3 90 Korea,Taiwan 70 Safe Havens ASEAN 4 Jan-01 Jul-01 Source: CEIC Big Idea: Overweight Southeast Asia Getting Exports In Perspective • Why Overweight Southeast Asia? : Defensive • Political events are giving Southeast Asians a sense that after four very difficult years they have a second chance to recover from the Asian Crisis and its after effects. % of Exports Natural Resources * % of Exports Natural Resources * % of Exports * 0 20 40 60 80 100 • Seek relative safety of exporters with higher local content : natural resource-rich SE Asian economies • SE Asia's commodities with +90% local content show signs of ending 10-15 year declines : palm oil up 50%, coconut oil up 30% : major income sources in Malaysia, Indonesia, Philippines. • Tourism a consistent hard dollar earner, beneficiary of improving social stability 0 20 40 60 80 100 Indonesia Indonesia 78.8 78.8 Thailand 64.7 Thailand 64.7 Malaysia Malaysia 55.1 55.1 Singapore Philippines 50.9 Philippines 50.9 Singapore 26.2 26.2 Korea Korea 11.2 11.2 Taiwan Taiwan 4.4 4.4 * Adjusted for local content and value-added in exports * Adjusted for local content and value-added in exports 2 Aug Overweight SE Asia

  2. First Time Since 1949… Historic Moment In 2002 % Share of Industrial Output 80 70 Private Sector 60 50 50 40 TVE 30 20 State Enterprises 10 0 80 90 94 98 02E Research-Works Forecast Source: 2000 China Statistical Yearbook Big Idea: China • ‘The most important long term decisionthat fund managers can make this year is to spend much more time getting to know China. Not only is it nearly 30% of regional market cap but 13 China Mega Trends will support some of Asia's best performance. Investors' perceptions lag reality or are fogged by out-dated experience. No longer can China be ignored.’ • Mega Trends will change China beyond recognition: • Private Sector Dominance: overtakes state in 2002 • Private Property: critical to private sector-led economy • Housing Reform: creates instant wealthMortgage Market Developing: 20% of urban new loans • Consumerism Taking Off: $500 bn market larger than Korea, Taiwan, Hong Kong and Singapore combined • New Mindsets: post Cultural Revolution generation • End of Deflation: investment, consumption boosted • More Taiwans: Taiwan companies pouring capital and people into Mainland at an accelerating rate 15 May China – The Most Important Decision

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