Renewed investor appetite to spur further Asian recovery, says ADB

Tashkent, Uzbekistan (UzDaily.com) -- Renewed private investor interest should help Asia and the Pacific build on its fast recovery from the global crisis, but investor interest across the region is likely to be uneven, a seminar audience heard today.

The Institutional Investors Roundtable, Green Shoots of Recovery - Prospects for Asia in the New Economy, examined Asia’s rebound from the crisis, and looked at what is needed to sustain the region’s fast pace of growth. It discussed the potential risks faced by recovering countries in the region, and examined the prospects for the capital markets and infrastructure investment.

Speakers included Om Prakash Bhatt, Chairman, State Bank of India; Robert Parker, Senior Advisor, Credit Suisse Asset Management; Oliver Bolitho, Managing Director, Goldman Sachs Asset Management Asia; and Rajiv Lall, Managing Director, Infrastructure Development Finance Company, India.

Asia has rebounded quickly from the crisis, supported by fiscal stimulus and accommodative monetary policies, with ADB now forecasting developing economies in the region to expand 7.5 % in 2010, from 5.2% in 2009.

However, many countries in the region now face a number of challenges ranging from inflationary pressures and high debt, to brewing asset bubbles in property markets. The export-driven region is also facing weak demand from its traditional markets in the US and Europe, and a possible spike in commodity prices in coming years.

While the global outlook remains uncertain, a recent international survey shows institutional investors are expected to boost their investment allocations to the region significantly this year, with the bulk of the funds earmarked for People’s Republic of China and India.

However, commercial lenders and international institutions, hurt by the global crisis, are likely to bypass investments in smaller, more challenging markets, the seminar heard.

"Commercial lenders and international financial institutions today remain risk cautious, some would even say risk averse, outside the major markets of Asia," said Philip Erquiaga, Director General of ADB's Private Sector Operations Department in opening remarks at the seminar. "The question we have to ask is whether the People’s Republic of China and India can act as engines to catalyze investments in the rest of the region."

The seminar highlighted the opportunities for regional infrastructure and trade across Central Asia.

Private investment opportunities in the region remain huge, with Asia estimated to require as much as $8 trillion in overall infrastructure investment, alone, between now and 2020. At the same time, governments in the region need to put in place the right regulatory environments, and to deepen and broaden regional bond markets, and other financing mechanisms, to attract long-term investors.

“Infrastructure is one of the most attractive asset classes for investors going forward, because its inflation linked,” said Mr. Parker of Credit Suisse Asset Management Asia. “We anticipate enormous investor demand for infrastructure investments over the next decade.”

In Central Asia, ADB has worked to boost transport, trade and energy links across borders, which could provide a model for cross-border infrastructure investments in other parts of the region. One possible option for infrastructure projects is to step up public-private partnerships which can help spread the risks and costs. Organizations like ADB, with its ability to leverage private funding, could play a major role in this area, the seminar heard.