Specific recommendations for 2003 (page 1 of 4)

In particular, I should like to mention that the current US dollar weakness in no way alters the Asian economies' competitive position, since the Chinese Renminbi is pegged to the US dollar at a time when the other Asian economies are increasingly feeling the threat from the colossal Chinese export machine, which is eating into their export markets.

So unless China revalues its currency (which is not very likely, for now), it is unlikely that the other Asian exporting nations would wish to have strongly appreciating currencies. And while US economic policy makers will continue to stimulate credit growth and consumption in the US by increasing the indebtedness of households, the wealth transfer to Asia via the US trade and current account deficit will continue and stimulate industrial production in Asia and other emerging economies.

To an unbiased observer it would seem almost that US economic policies are designed to impoverish the United States and to enrich Asia, since in a deflationary environment and amidst globalisation it is inevitable that production must shift to the lowest-cost producers, which then flood the high-cost Western industrialised countries with low-cost goods.

Moreover, it is only a matter of time before knowledge- and science-related services will also be exported from Asia, since the cost of establishing and maintaining research labs is far lower in India and China than in Western countries. Consequently, I remain quite positive about investments in Asia - in particular, because investors around the world remain underweight the Asian region.

So, while US international mutual funds had over 4% of their assets invested in Asia between 1993 and 1997, today, these funds have less than 1% of their assets in this region. However, considering that Asia is not only growing more rapidly than Western countries, but is also home to 56% of the world's population, and that many of its markets - such as for TVs, radios, motorcycles, cellular phones, steel, etc. - are far larger than in Euroland or the US, even a 4% exposure would seem to be extremely low and a less-than-1% asset allocation almost irresponsible.

Therefore, it is my belief that it is only a matter of time before the world's savings, which between 1997 and 2001 flowed largely to the United States, will be redirected towards Asia and lead to fairly strong rallies in the region. And although Asian markets have outperformed the US over the last two years, they remain extremely depressed by historical standards. In US dollar terms, many Asian markets are still down by 70% from their highs, but, unlike the Nasdaq, they have now built bases since 1998 and therefore offer lower-risk entry points than the TMT sector, the S&P 500, and Western European markets, which, although down percentage-wise by a similar amount, have at this point not built any longer-term bases.

I am repeatedly asked about investments in Asia and, as I have suggested in the past, there are numerous avenues to participate in the Asian region. For retail investors, there are a number of closed-end Asian funds available, such as the Singapore Fund (SGF), the MSDW Asia Pacific Fund (APF), and the Asia Pacific Fund (APB), which are all listed on the New York Stock Exchange and sell at discounts of between 10% and 20% of net asset value.

The India Fund (IFN), the India Growth Fund (IGF), the Jardine Fleming India Fund (JFI), and the Morgan Stanley India Investment Fund (IIF) are also listed on the NYSE. For an exposure to China, the following funds, which are listed on the NYSE, could be considered: the China Fund (CHN), the Greater China Fund (GCH), the JF China Region Fund (JFC), and the Templeton China World Fund (TCH).