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Rise of the tiger

After months of weakness, the economies of East Asia appear to be

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Step away from the frenzied din on Wall Street and listen: That faint growl is the sound of the Asian "tigers" back on the prowl.

Just 20 months after triggering the worst global financial turmoil in five decades, East Asia is changing for equity analysts from polecat to pussycat.

"East Asia is leading the emerging-market charge long term," says Joshua Feuerman, manager of the Emerging Markets Fund at State Street Global Advisors in Boston.

Despite several uncertainties, most equity markets of the region's erstwhile economic powers have surged so far this year: South Korea up 10.1 percent; Hong Kong, 8.9 percent; and Taiwan, 7.2 percent. "Going forward they will be a tremendous source for growth," says Mr. Feuerman.

The region has been jolted by a 14 percent rise in Japan's stock market this year, by far the region's biggest economy.

But even without Tokyo, there are signs that many East Asian economies could soon begin to run again on their own legs.

After months of seismographic jigs, currencies have stabilized. Sagging economies have bottomed out and show hints of new vigor. Corporations are restructuring, most notably by smashing the practice of lifetime employment through mass layoffs.

And, to varying degrees, governments have begun to dismantle "crony capitalism," or the cozy relations between officials and businesses that led to a disastrous overexpansion of credit.

"If I had sat down and drawn up a wish list a year ago, these are the things I would have asked for," says Mark Headley, a portfolio manager for Matthews International Capital Management in San Francisco.

"These economies are finally stabilizing and equity valuations are still excellent, particularly compared to the US market," says Princeton University economics professor Burton Malkiel. "It's a wonderful time to begin making commitments" in East Asia.

By some accounts, the revival has just begun. East Asia in 1988 accounted for 18 percent of the world's output and a massive 44 percent of the wealth in world equity markets. Last year the region's share of the global economy was 21 percent. But East Asia held just 15 percent of the total value of stocks in world equity markets, says Mr. Headley.

"Investing in East Asia today is like putting money in US companies at the end of the Great Depression," says Feuerman.


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