ASEAN economic summit -- Good for Asian funds
May 16, 2007
The Economic Ministers of the Association of SouthEast Asian Nations (ASEAN) met May 5 in Kyoto, Japan. The meeting provided the impetus for several free trade agreements (FTA) among members of the ASEAN+3 group, including Japan and ASEAN, and Singapore-Malaysia. In addition, FTA’s are being initiated between China and ASEAN, the EU and ASEAN and South Korea and ASEAN.
Under the agreement, which is scheduled to be signed in November, Japan and the ASEAN contries will abolish over 90% of tariffs on over 5,000 traded goods over the next 10 years. However, Japan will seek to protect agricultural products, which could stymie the agreement.
FTA's between two of ASEAN's largest economies are being discussed. Malaysia’s Prime Minister Abdullah Ahmad Badawi and Singapore’s Prime Minister Lee Hsien Loong met in Malaysia on Monday to discuss furthering free trade. They are both interested in counterbalancing the influence of India and China in the region. Malaysia is looking for investment from Singapore to increase its development in its southern region. The two countries also agreed to substitute “smart cards” for passports, to allow easier travel for businessmen and tourists.
What the ASEAN summit agreements mean:
As pointed out last year, (See ASEAN meeting, 8/30/06) the 560 million people in the 13 ASEAN nations could generate more GDP wealth than the EU over time. With agreements with China, India, and Japan, Asia would become a more powerful economic bloc than the U.S. and EU.
Furthermore, Malaysia and Singapore have been long-time rivals. (See “Malaysia, Singapore agree to closer ties,” 5/16/07) An agreement between these two powerhouses will drive economic growth in the area to new levels.
Action steps:
Loyal readers of this newsletter should have Southeast Asian mutual funds in their portfolio. There is a danger that this market could be overheated. (See “Is Asian economy too hot? 1/24/07) However, long term growth remains positive, thanks to these agreements.
The solution? Depends on when you need the money. For short term funds, (needed in 10 years or less), move your emerging markets funds into something safer, like cash or bonds. But for money you need to fund your retirement more than 10 years from now, keep your Japan and Asian emerging markets funds. Of course, do nothing until you’ve talked to your financial planner.
Source: Channel News Asia, “PM”s retreat to boost Singapore-Malaysian ties,” 5/13/07, Japan Times, “Freer trade with ASEAN,” 5/14/07.
Related articles:
ASEAN closer to SE Asian EU, 1/17/07
China-ASEAN summit, 11/1/06
China begins trade negotiations with Malaysia, 4/8/06
An Asian WTO, 5/6/06
APEC meeting, 11/21/06
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