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Europe recovering, S. Korea & M'sia stand to gain
Publication Date : 24-08-2013
BNP Paribas Securities says Europe’s economy appears to be on the mend, and Asian countries with significant manufactured exports to Europe stood to be the biggest beneficiaries of European recovery.
It named South Korea and Malaysia as among the countries most likely to benefit, followed by China and India, for whom the positive effect would be somewhat diffused because their export baskets are a diverse mix of staples and cyclicals.
According to the BNP Paribas research team, the eurozone is growing again, with GDP expanding 0.3 per cent in 2Q13 after falling for six long quarters. Moreover, this growth was stronger than expected and spread across most eurozone members.
And on Friday, Germany bested BNP Paribas’s forecast of 0.1 per cent Q2 growth by turning in a figure of 0.7 per cent GDP growth quarter-on-quarter and 0.9 per cent year-on-year.
“Our economics team expects the improvement in both external and domestic conditions to persist as financial market stress has been kept relatively low for around a year, and notwithstanding the continued fiscal tightening across Europe, the severity of the adjustment is easing,” it said.
It added that while tepid growth for much of the last decade has resulted in the proportion of exports to Europe declining for most Asian countries, Europe was nevertheless still among the top export destinations for countries like China and India.
But the biggest beneficiaries would likely be South Korea and Malaysia since manufactured goods constituted the bulk of their exports to Europe – up to 60 per cent according to 2011 figures.
In terms of individual companies that will likely benefit, BNP Paribas said it picked those with large exposure to Europe – mainly those with more than 15 per cent revenue contribution from Europe and whose stock received Buy recommendation from its analysts.
Among these are South Korea’s Samsung Electronics, Samsung Heavy Industries, Kia Motors and Hyundai Motors; India’s Tata Motors, HCL Tech and Wipro; Japan’s Seiko Epson, Sumitomo Heavy Industries, Ricoh, Canon, Olympus and Hitachi High Tech; Hong Kong’s HSBC, Prada and L’Occitane; and Taiwan’s Hiwin.
As Malaysia’s exposure to the eurozone is relatively limited, with exports there constituting less than 10 per cent of total exports, no Malaysian companies were picked.