Analyst expecting tech stock thrust
Technology plays are expected to lead a rally in Asian stock markets next year, spurred by interest-rate cuts in the United States.
'When the Federal Reserve cuts rates the most money is going to be made in Asian technology,' S G Securities global equities analyst Bijal Shah said.
'The first rate cut could be as early as next quarter.'
He said cuts in the benchmark federal funds rate would be made in response to rising US unemployment. There were already signs of the economy slowing, with a slump in new orders for manufacturing companies in response to previous increase in interest rates.
'The US economy is slowing - it is slowing quite rapidly,' Mr Shah said.
Worries about the slowing economy were also causing US company directors to sell down their holdings.
'What we are seeing is a massive increase in the number of directors selling stocks in their own companies,' Mr Shah said.
Unemployment was also expected to be pushed up by US companies replacing labour with new technology in an attempt to boost productivity.
Asia was expected to benefit as part of this new technology would be made in the region and US manufacturers were expected to increase their out-sourcing in a bid to cut costs.
On a global basis Mr Shah recommended investors buy technology and other cyclical stocks ahead of the rally he expects lower interest rates to trigger.
Investors should sell holdings in food and beverage firms - seen as defensive counters during a downturn. 'Get rid of these defensive stocks - now is the time to get more bullish,' Mr Shah said during the S G Jewels of Asia conference yesterday.
The level of the rise in unemployment would determine the magnitude of cuts in US interest rates next year, he said. The benchmark federal funds rate is 6.5 per cent after the Fed began lifting the rate in June last year.