Focus on downside risk has receded over the last year. The macro outlook is more balanced and the recovery is expected to continue. For the first time in a long while, we see potential for an upside surprise next year.
Asia Pacific was the only region to post growth in invested stock in 2012, offsetting declines in both Europe and North America and powering growth in global invested stock of 1.5%. This sees Asia Pacific edge closer to Europe, currently the market with the largest value of invested stock.
Regional growth was led by the emerging markets on the back of relatively strong economic growth. China overtook Japan to become Asia’s biggest market, as its invested stock grew 15% in local currency terms.
Deleveraging continued across much of the region, as private equity replaced private debt as the largest source of growth. However, growth in the corporate bond market gathered momentum year-on-year.
Asia Pacific remains a bright spot in the global economy. Whilst events in Europe will continue to affect global sentiment, the outlook remains positive, especially considering the following:
Commercial investment volumes in Asia Pacific remain buoyant by historical standards. Transaction volumes excluding land sales increased by 21% in 2012, while the proportion of inter-regional investment activity also doubled.
Relative value is at the best level in eight years, due to lower bond yields and the better growth outlook, with the majority of Asia Pacific markets considered attractive (warm or hot).
With relative value now more widespread, we think investors should consider liquidity and size more closely. Within Asia Pacific, Singapore offers high liquidity but lacks size; Australia, China and Japan are larger markets, but are comparatively less liquid. The growing markets of India and Malaysia offer good opportunities and above average liquidity over the long-term (Figure 1).
Source : DTZ (Groupe UGL)