The Asia Pacific Fund's Manager Medium-Term Outlook for the Region; Cautious Optimism - Defensive Growth and Value Cyclicals Investments Preferred.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 14, 2003

Portfolio Manager of The Asia Pacific Fund, Inc. (NYSE, PCX: APB), James Squire is optimistic about the medium-term outlook for Asia ex-Japan equities and believes a defensive stock-picking strategy can capture attractive equity valuations and insulate investors from the worst ravages of market volatility.

"Higher returns and stronger balance sheets among Asia ex-Japan companies have yet to be rewarded by the markets," says James Squire, Portfolio Manager of The Asia Pacific Fund. "While Asian markets have shown less volatility to swings caused by external risk factors, such as the war in Iraq, compared to the developed markets of Europe and the U.S., the sustainability of a rally in Asia will be influenced largely by external factors.

"Event risk is high, at present, and the full impact of the SARS outbreak in the region, and indeed the rest of the world, has yet to be seen. Fear of catching this potentially fatal virus is significantly affecting the Hong Kong economy and the broader Asian tourist industry: airlines, hotels, fast-food and retail outlets have been hit the hardest," says Mr. Squire. "However, the Asia ex-Japan equity risk premium is more likely to fall from its current high of 9.9% than it is to rise further since so much bad news is already being discounted by the markets."

Following are Mr. Squire's main investment views on Asia ex-Japan equity markets:

Investment strategy: Sector and country rotation are dominating investing at the moment, and Squire recommends defensive stock selection as opposed to taking significant positions based on sector or country. He favors stocks in economically dominated themes, such as lowest cost producers and domestic consumption plays, market-dominated picks, such as restructuring and special situations, and selective higher beta (oversold) stocks.

Medium term - Favors South Korea over Taiwan: Taiwan valuations, if stock options are fully expensed, appear challenging. The banking system is weak with non-performing loans understated at most banks. Finally, the dominance of technology (60% of the market) is unhealthily high. Despite other concerns in Korea, the market has a broader base of stocks to choose from, and their valuations are significantly lower.

Asian valuations are attractive on a relative basis against the other major equity regions: Looking at Asian equity P/E as a percent of US market forward P/E, the relative discount to is close to record lows, despite Asian equities having outperformed on a three-year basis. The region's forward P/Es appear more realistic than those of the developed markets in comparison to trailing P/Es - suggesting less aggressive earnings rebound.

Realistic economic growth and market earnings' expectations for 2003: Mr. Squire expects Asia ex-Japan regional earnings growth in the high single-digit range, annual economic growth of 6% for Asia and 4.8% for Asia (ex-China & India).

Local liquidity is extremely high: Thus far in 2003, approximately two-thirds of companies in Asia have been increasing their payout ratios and dividends. Local investors are contemplating taking advantage of a positive yield gap between Asian equity dividend yield (3.1%) and interest rates (interbank 2.8%). Asian stock market capitalization-to-deposits is close to record lows.

Asian equities trade at a low market implied growth rate (the MIGR). At 2.9%, the MIGR is less than nominal economic growth of the region (circa 8%) - the post-January 1998 average was 10.9% MIGR.

Medium-term, the S&P 500 is the most likely determinant for the Asian markets: There is a close correlation between Asian & US equity markets currently. This correlation does varying significantly over time. However, it is unlikely to "decouple" in the immediate future and the S&P500 is likely to continue to lead Asia over the near term:

Top Stock Picks

Cyclicals:              Singapore Exchange
Low Cost Producers:     Kingboard Chemicals
Large-Cap:              Korea Telecom
Restructuring:          Petrochina
Consumption:            Singapore Press
Defensives:             Ratchaburi Electricity
Best of Breed:          Samsung Electronic
Special Situations:     Guoco

Asset Allocations By Country as of 12 May, 2003
(benchmarked against the MSCI AC FE Free ex-Japan Index)

Hong Kong 30.4%         Neutral
Korea 28.6%             Neutral     Reduced recently
Taiwan 15.4%            Underweight
Singapore 11.6%         Overweight
Malaysia 6.4%           Underweight
India 2.3%              Overweight
Thailand 2.1%           Underweight
Indonesia 1.2%          Underweight
Cash 2.0%

About The Asia Pacific Fund

The Asia Pacific Fund is a diversified, closed-end management investment company, listed on the New York Stock Exchange under the symbol "APB." The investment objective of the Fund is to achieve long-term capital appreciation through investment primarily in equity securities in the Asia Pacific countries (excluding Japan). The Fund is managed by Baring Asset Management (Asia) Limited. For further information on The Asia Pacific Fund, please call our toll free line at 1-888-4-ASIA-PAC or visit www.asiapacificfund.com.