Chinese stimulus package short-term +ve: Daiwa Institute

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Asian markets on an average have seen a 2-3% cut. Hirokazu Yuihama, Asian Regional Strategist at Daiwa Institute of Research believes that the economic stimulus package by the Chinese Government will be short-term positive for Asian markets. Chinese construction, infrastructure related or material sectors will benefit in the short-term said Yuihama.

Here is a verbatim transcript of the interview with Hirokazu Yuihama  on CNBC TV-18. Also see the accompanying video.

Q: After that USD 580 billion stimulus package we got from China, how is Asia positioning itself going into that all important G20 meeting in the weekend?

A: I think this economic stimulus package is very positive in the short-term to the Asian markets. I think the Chinese government can assert that the China is going to contribute to the recovery of world economy.

The Chinese construction or infrastructure related or material sectors will benefit in the short-term. Maybe in mid to long-term steel industry will prosper from this kind of package. But we still have to be cautious because out of this size of the stimulus package how much will actually be invested in project, so we have to wait and see those figures.

But it is certain that this type of economic policies or measures will be positive to the market.

Q: Looking at the Korean market in particular the Won has depreciated about 2.5% against the dollar yet we are not seeing that surge in exporter stocks which we would have, so overall do you see the gloomy picture continuing despite your domestic cue supporting it?

A: Actually, I would put the Korean market in a neutral stance. The Won depreciation could be positive to the electronic sector in terms of the price competitiveness but with the current global market slowing down; the overall demand for electronic sector or even auto related sectors will be very sluggish for the next year.

But I don't expect the return of the financial crisis like that of the 1997 or 1998; looking at the position of the falling reserves or the short-term debt coverage ratio this is still helping Korea. So we don't have to be so negative on this market.