Asia Powering Ahead of Europe


The Cyprus/Euro crisis is driving the decline. It##Q##s more confirmation that our “Asia up, the West not so much” idea is working as expected…

The trend is the gradual increase of Asian economic power… and the gradual decrease of old European economic power. Many European countries have declining population growth and onerous business regulations. This creates a headwind against the region##Q##s stock and real estate prices. Many Asian countries have healthy population growth and are embracing free markets. This creates a tailwind behind the region##Q##s stock and real estate prices.

We often frame this idea by comparing the returns made in the big Singapore stock fund (EWS) versus the returns made in the big Italian stock fund (EWI). Singapore is a global financial hub and is considered one of the world##Q##s easiest places to do business. It also sports a low corporate tax rate. Italy is deep in debt and tough to do business in.

As you can see from today##Q##s three-year chart, the recent Cyprus debacle is a small part of a much bigger trend. Since early 2010, the EWS (blue line) and EWI (black line) have plotted very different courses. Factoring in dividends, Singapore is up more than 30%. Italy is down 30%. When it comes to Italy, we##Q##ll take the wine and food… you can keep the stocks.


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