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Sunday, March 30, 2008

Are global investors shying away from Asia?

It looks like better opportunities now lie outside Asia, "for investors who think they can spot a market trough and ride a recovery".

With the markets in United States and Europe rapidly softening, opportunistic investors are now refocusing their sights and looking at distressed assets that are mush-rooming in the wake of the US subprime crisis.

Also in their sights is Japan, as the country starts practising tougher loan approvals.

Fund managers at a recent conference in Hong Kong said many global hedge funds have stopped dabbling in the region's property and though private equity players continue to develop in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

A recent Reuters report said many funds and private equity firms that made "fat profits" from the revival of Asian property markets following the 1997-98 financial crisis are now looking elsewhere.

It quoted Morley Fund Managers' Asia fund strategist Guy Cawthra as saying, " Six months ago, we didn't have to answer questions about why invest in Asia ... now investors say, "we might not want to invest in Asia, we want to invest in Europe, UK and the US".

JPMorgan analysts said US commercial real estate values could, in the next five years, fall 20 percent from their 2007 peak because of tight credit and a worsening economy, while London's office rental values, which dropped 12 per cent from their peak last June, would fall a further 10 per cent through to 2009.

Fortis Investments head of real estate Bart Coenraads thinks " a lot of investors would return to home markets and some would buy distressed properties and refinance them ... ( in order to) make good returns".

By New Straits Times (by Zoe Phoon)

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