Asia's exporters suffering as global demand weakens

WHAT TO BUY?

Analysts and fund managers reckon firms with established brands, which own technology higher up the value chain or enjoy large cash balances -- such as Samsung Electronics (005930.KS) or Taiwan Semiconductor Manufacturing Corp (2330.TW) (TSM.N) -- will fare better in this environment.

"Slowdowns are sometimes a double-edged sword that can benefit outsourcing. So for Taiwan tech this year, export growth is still in the double digits and the fundamentals remain quite solid," said Kevin Chang, an analyst at Yuantai Securities.

Old-economy exporters that need intensive labor, energy or raw materials, such as garment, car and cellphone makers, are more vulnerable to inflating costs and shrinking demand.

Other firms, far from fighting a holding action, might spot an opportunity to expand through acquisitions in a down market.

"If the company has net cash or low debt, they've got flexibility and will not be forced into making any foolish business decisions," said Hugh Young, Managing Director at Aberdeen Asset Management, which has $40 billion in Asian equities.

They "might have a golden opportunity to buy one of its competitors at rock-bottom price."

Energy-saving devices maker Computime Group Ltd (0320.HK), which ships about half its goods U.S.-ward, has stepped up efforts to enhance technology with automation and by slashing staff.

"We'll focus on our brand and outsource to Vietnam, Mexico and east Europe," said chief executive Bernard Auyang.

SHARES

Weak U.S. sentiment has knocked down many top Asian exporters in the past three months with U.S.-focused trading firm Li & Fung (0494.HK) plunging 23 percent. LG Electronics (066570.KS) dropped 16 percent and TSMC fell 8 percent in the same period.

But there's hope yet. Some economists say Asian countries are still posting good growth, surprising the market on the upside.

China, which became the top exporter to the United States alongside Canada in 2007, accounts for 8.8 percent of world exports. Its total exports rose 28 percent in May, beating forecasts of 20 percent.

But the question is how bad it will get.

Toyota expects U.S. vehicle sales, which plunged to a 15-year low in June, to bottom and foresees a modest recovery in 2009.

JP Morgan sees Euro zone growth sliding to under 1 percent by mid-year from 3.2 percent in the first quarter and Japan easing to 1 percent, with downside risk, in the second half.