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SCMP Reporter

JAPAN and South Korea are tipped to show strong growth this year amid the relative volatility in other Asian markets including Hong Kong, according to Chrissy Keen, investment communications director of Fidelity Investment.

    Ms Keen said yesterday profit-taking activities had made the Hong Kong market fairly volatile.

  ''The market was going too far and too fast last year. But we think that looking at a one-year horizon, Hong Kong is still very attractive,''she said.

      She thought Malaysia and Thailand would have more volatility than others because there was more speculation.

   She said Hong Kong and Korea were Fidelity's favourite countries.

    However, she said investors with diversified portfolios should under-weight the US and rerate their weightings in continental Europe and Japan.

  The cautious sentiments cast over Japan for the last year would gradually dissipate soon in response to a few signs of resumed economic drive.

  ''Investors should take another look at Japan this year. There are signs showing that the worst is now behind,'' Ms Keen said.

  Housing stocks there had been picking up, a phenomenon with a strong correlation to consumer sales.

  Ms Keen said growth in Japan this year would be generated mainly by higher consumer spending, increased exports and the stimulus the Government had injected into the economy.

  Corporate earnings would start to improve next year, she predicted after talking to Japanese corporates.

   ''Since the market anticipates higher earnings next year, coupled with the fact that most investors overweighted Southeast Asia and underweighted Japan last year, it is the right time to start looking at Japan again,'' Ms Keen said.

  Although news of the Japanese banks' bad debt conditions will continue to surface, the situation will be much better than what it was 12 to 18 months ago.

  Both domestic and international investors were anticipating an improved economic environment. ''Many Japanese investors are sitting on cash. They will now consider moving the cash to the markets,'' Ms Keen said.

  Investors who had overweighted in Southeast Asia might shift some to Japan and funds would also flow from the US, where the stock markets did not look too attractive this year, she said.

  ''Unless there is surprising news, the markets are not particularly exciting,'' she said.

  Much more exciting are those economies on the verge of recovery, such as Japan and those in continental Europe, and not the US, which is already recovering.



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