As the G20 meets maybe now is a good time to find reasons to be cheerful

Victoria
By Victoria November 5, 2012 11:41

As the G20 meets maybe now is a good time to find reasons to be cheerful

Passenger flights and air freight movements are slowing, the market is trending downward but we can still freely argue that much of this comes following the huge 2010 bounce that rather short sightedly did not factor-in a Eurozone crisis on the scale seen to date. The current worry in the background is the US election on Tuesday. Whichever way it goes, it is a harbinger of the massive fiscal crunch that we all need the US electorate to power its way through.

All the while Spain fights off pressure to seek a bailout and Greece continues to burn through money with no end in sight. With all that in mind it is ironic that European nations will be lobbying Asian investors and finance ministers for aid in Laos, which is of course a hard line communist country that is essentially broke. Maybe someone somewhere thought it a bit of fun to show the European leaders how bad things can get….

Asian economies are showing the way for many nations at this time. In Indonesia, falling exports in the third quarter got the headlines, but below the surface strong domestic spending and rising investment look set to keep the GDP growth rate above 6% for 2012.

In Singapore, DBS Group posted a higher-than-expected third-quarter net profit of $856 million the other day, up 12% on last year and 6% on the quarter. The foundation for this growth is the reason for our using this gauge, as it was property loans in Singapore and record fee income on the same. The Asian economy is slowing, but it remains resilient.

The AirAsia X offering of 790.12m shares or 33.3% of the company in a US$250m (IPO) in January looks set to go off without too much dire macro-economic news killing off interest. In its draft prospectus released yesterday, AirAsia X said it would use 55.1% of the proceeds to repay bank debt, with 21.5% set aside for capital expenditure. The balance (20.2%) would be used for working capital and the rest for listing expenses.

But would you invest in an Asian low-cost carrier just as capacity explodes while demand wains? The reasons for and against are finely balanced at best. Bravia Capital’s interest in SpiceJet is well founded and this is maybe the pick of the extensive bunch today, but the risks are very high indeed and all/any investment will have to be for the long term slog. When investing in airlines in the here and now the mainly stable US market is the only reasonably safe bet.

We shall see.

Victoria
By Victoria November 5, 2012 11:41
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