Q&A: Ajay Kapur

Investors piled into Asian stocks in 2003, and Ajay Kapur, head of Asia-Pacific Regional Strategy Research at Citigroup Smith Barney in Hong Kong, believes the region will continue to outperform the rest of the world. He recently spoke with Asia Correspondent Frederik Balfour in Hong Kong:

Why will Asian stocks outperform?

Valuations are just 1.7 times price to book, and we see 22% growth in earnings per share next year regionwide. Asia's p-e ratio of 12 times 2004 earnings is about a 30% discount on the U.S., but returns are similar.

What are the risks ahead?

A rise in U.S. interest rates earlier than anticipated. Or China's growth slows -- though we don't expect this to happen in the first half. There is also a risk of what happens with so many elections in the region in 2004. They are scheduled in Taiwan, the Philippines, India, and Indonesia.

Will a weaker dollar help or hurt?

It's wonderful for Asian equities. Asia, except Japan likes a weakening dollar; it means European and Japanese currencies are strengthening. This forces Europe and Japan to boost their economies and spur demand for more Asian imports.

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