More on a developing Asian bust, and I'll lay a wager that the Chinese economy collapses by July 4th (if it's not already?)just based on this;
kitcometals.com
and is really a given if we get another oil spike.
Asian Economies: Impending Crisis?
May 24, 2004 0012 GMT
Startfor Summary
South Korea recorded $3.62 billion in stock-related capital outflow between April 29 and May 19, according to a Bank of Korea report released May 23. Seoul is not the only Asian country seeing an outflow of foreign investment: Political uncertainties and other factors are contributing to outflows from China, Hong Kong, Taiwan, Thailand, Indonesia and India, among others. Though the causes are different, the cumulative effect requires close monitoring.
Analysis
Foreign investors pulled a net $3.62 billion out of the South Korean stock and bond market between April 29 and May 19, the largest single foreign monetary outflow in a 20-day period since the 1992 opening of the Korean stock market, the Bank of Korea reported May 23.
But Korea is not the only country in Asia experiencing foreign capital outflows. Investment continues to drain away from Indonesia, Hong Kong and Taiwan have recently taken hits in their stock markets, money is leaving China and Thailand, and investors are uncertain on places like the Philippines and India. Though several different factors are contributing to the outflows of foreign money, the overall trend deserves careful monitoring and attention.
According to the Bank of Korea report, foreign investors spent just $7.11 billion in the South Korean stock and bond markets for the 20-day period, while withdrawing some $10.7 billion, resulting in the net $3.62 billion outflow.
South Korea has faced political uncertainties from the now-reversed impeachment of President Roh Moo Hyun and the election of the Democratic Labor Party to the Parliament for the first time. There is also the perception of growing tension with the United States and a sense of rising anti-Americanism. This -- coupled with the so-called China Shock, which hit South Korea perhaps hardest of all the Asian economies due to the countries' close economic ties -- has led foreign investors to lose confidence in South Korea, at least for the short term.
However, the South Korean experience is not isolated. The recent political rows with mainland China and Chinese economic news contributed to capital outflows in Hong Kong, leading to wide fluctuations in the stock market. In Taiwan, the Chinese economy and uncertainties surrounding President Chen Shui-Bian's re-election and the island's relations with mainland China recently have impacted foreign involvement in the stock market as well.
Thailand has seen a steady outflow of capital since 2003, though this is being brushed aside in Bangkok due to flush liquidity -- and in some sense is being welcomed as contributing to a weakening of the currency, allowing the continued growth of exports and tourism. In the Philippines, economic problems have dogged a government facing terrorism and insurgency in the south and the specter of coups and people-power rebellions in the capital. And in Indonesia, foreign investors continue to shy away from a politically unstable democracy. Even India, the darling of the tech and service-outsourcing industries, is experiencing investor wariness, due to the Congress Party's recent surprise victory in elections.
Though the triggering factors vary, the general view emerging is one of an Asia showing signs of an impending economic downturn or crisis that are similar to the indicators before the 1996-97 crisis. The net effect of capital outflows from several different key regional economies requires close attention. Regional currencies, which have seen only minor drops in recent months, are another key indicator to monitor.
China will be a critical focal point: It is this country that remains the key to the Asian economic situation, and which is perhaps on the most tenuous legs. The effect of the China shock on the Korean economy -- one of the few that made real progress in reforms after the Asian economic crisis -- reinforces the increasingly powerful effect that China wields over its neighbors. The Asian economies warrant careful watch. |
