Transcript of BlackRock's Mark McCombe on Asia/Pacific Investment Themes

BlackRock's Mark McCombe on Asia/Pacific Investment Themes

Question 1: How Would You Grade Asia’s Recent Economic Performance and Prospects?

Well, it’s been very interesting growth story because this courses covered the global financial crisis and I think up one level we can say that ages performed exceptionally well. We’ve seen that actually in spite of global slowdown, Asia continues to be an engine of growth of the wealth economy. But of course there’s a lot of volatility in those markets and between India and China and the ASEAN countries. We can see that actually is a great diverdence in the economic growth story as I think investors need to look underneath the economy to see what‘s really going on.

Question 2: Where Do You See Specific Investment Opportunities in the Region?

 I think you have to look at a sector by within different countries to really see where the investing opportunities come from, you can obviously buy the markets and that’s what a lot of global investors are doing. But my recommendation is that you lift the lid up on the ASIAN economies and really get underneath which sectors are performing better than others and of course there we’d like to play into the global growth stories like the rising middle class in Asia; people having to take control of their own, retirement, savings, people having to spend more on healthcare and welfare more generally so we’re big components of these sectors, service sectors, education, and foster moving consumable.

Question 3: Does the Region Remain Vulnerable to Hot Money?

This is a big policy question and obviously if you look at the underling corporates that a growing successful in this region, they are not too affected by it. But clearly one other things we’ve seen over the past couple of years is real. Hot money flows in and hot money flows out and that makes it very difficult for policy makers to maintain really strong discipline over the economy. So one of the things we’re very keen on is that tapering continues in the US. And as Japan continues to stimulate its economy, we believe that this is going to be fundamentally good for Asia in the long term because it will bring a greater degree of stability and continuity.

Question 4: Which Countries Will Be Most Affected by Tapering?

All those countries that are tied to the US dollar clearly have a greater exposure and so the ASEAN markets is the one that we watch particularly and also obviously markets like China and India. But you can see that some of these economies are becoming more fiscally independent and actually standing on their own two feet when it comes to their economic growth. The countries like the Philippines or Indonesia where they have great opportunities for growth over the medium to long term.

Question 5: How Can Asia Attract More Foreign Investment?

First and foremost, we cover a lot of the policy stability and predictability. International investors love to see continuity within the markets and they like to see consistency and great degrees of transparency. So certainly one of the things we worried about was the hot money coming in was, you know, providing the cheap credit into these markets and that may have been spawning the wrong behaviors. So we’re hopeful that now tapering continues in the markets. The global economy becomes more stable. We think that’ll give these economies a better chance to manage for the long term.

Question 6: What Will Japan’s Role Be in the Region’s Economic Story?

Japan is a massive unknown factor in the Asian economic story and clearly there are some positives that we’re seeing in term of these efforts to replay the economy. We believe you’re going to be very positive for all the …reflective benefit into that. Of course the risks that we don’t really know at this point in time how long the real inflation story will last whether or not RB is going to be successful with this third arrow and our conclusion is that actually the Japan, the positive Japan story has a couple years to run because we believe the policy makers are showing real result to really get the economy back on its feet and get some inflation into the market.