The Asia Investigator
The Non Issue, Equity Issuance
 Asia ex: Yes, equity issuance is up, but still close to all time lows — Compared to
earlier this year equity issuance is up. Investors already see deal after deal & fear
market indigestion. Perception and reality however are far apart. Relative to
market cap issuance is the lowest in 17 years and vs. money supply we remain
well below average readings. If you want to worry about something, issuance isn’t
it. Page 3
 China: Tighter Domestic Liquidity — Given the reaction to the latest policy
announcements, it seems that H-share investors are more optimistic than
domestic A-share investors about the Chinese government’s determination to
sustain current liquidity levels. In the 2 trading days since Friday, the H-share
market has gone up 5%, compared with a very muted 1% increase for the A-share
market. The reason behind such a divergence in performances could be that the
underlying liquidity situation is worsening inside China. Page 14
 Pakistan: Exiting Bears — The Pakistan market is coming out of hibernation and is
closing the historical gap with the regional markets. While its regional peers are
trading above their historical averages, Pakistan is 17% below its mean P/E of
7.7x and P/B of 2.1x. As the economy improves, profit deterioration eases, banks
show signs of recovery and liquidity improves with FII flows, Pakistan should trade
at mean valuations, in our view. We up our index target to 10,500 from 9,000.
Page 18
 Fun With Flows: The First Sign of Improvement Since August — New money to
Asian equity funds quadrupled WoW to a 5-week high of US$286m. Comparing
this with average inflows per week between March and July, it is 61% lower, which
is much better than the 91% shortfall in the previous week. Year-to-date,
cumulative net inflows to all these offshore Asian funds have reached US$14b or
28% smaller than the total amount that had left Asia in 2008. Coincidentally,
MXASJ today is still 28% lower than it was at the end of 2007. Page 28
 Market Sentiment — Our sentiment indicator for the region edged higher last week
thanks to the sharp improvement in the risk appetite of Taiwan equities. Currently,
Taiwan risk-love indicator is close to one standard deviation above its historical
mean while the one for Korea is one quarter standard deviation behind while Hong
Kong and India slightly below average. Page 29