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Politics : Idea Of The Day

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To: Carlyle who wrote (12641)	10/23/1997 5:47:00 PM
From: IQBAL LATIF	Read Replies (2) of 50167

HK P/E ratios were 17 when index on 31st Aug closed at 14135- now it has dropped from there to nearly 10,500 with P/E of around 12-13, now if I look at equity market models by Datastream total market index HK model is at 95 levels- even the most pessimistic forecasts had predicted Hk not to break 11000-now it has, Malayasia Singapore Thailand HongKong are all trading below pessimistic forecasts- but you must agre markets don't fall with aggravation of fundamentals again at the back of these crisis lie same old hand of debt spiral and over extended property lending- if you look at Japan even they hads this same problem overvaluation and asset inflation in non-productive sector of economy, I would tend to think that we are totally underestimating the recuperative possiblties of ASEANs- these economies are very strong and export led- recent wake of devaluations will increase there appetite of raw goods as exports will lead them into recovery-some wage pressures and increasing costs feeding to hurt exports will now also now be addressed as goods become cheaper- this is going to show up very quickly- unlike Mexico where crisis was flight of short term money in Tessas and Tessebanos here in ASEAN countries we don't have maturities of huge private sector debt at stake- it is the current a/c deficit which is putting pressure on governments and currencies- when govt failed to address the issue markets did it cruelly. HK cash will be allowed to escape from HK - it is normal for banks to penalise early withdrawl of deposits -it is this small news made so big- the money in my opinion will allowed to be withdrawn- China sits on huge FOREX reserves and capital out flow will stop once it is known that no restrictions have been imposed. Markets in my opinion will realise the points you have raised sooner then expected- this is as area growth engine and nothing is going to stop only inflated parity which should bring these very much export dependent countries some relief- for US corporates we may see some slow down of capital item but I thnik US will not suffer from all this, US is into very specialised form of exports and Japan ASEAN countries will be in continous need of those products. I think it will be import of price stability which will help world economies a lot- growth with low inflation. Yes I agree thses unknown can take markets lower but I see this as a very short term nimble opportunity. markets will focus more on quality of instrument to invest and some equities- will 9 trillion $ be affected by say additional 30 billlion max coming out of HK - I doubt it very much- the isse would be much of a concern if flight was from $ into Yen - or DEM- $ goes higher- imports become cheaper- US debt become cheaper to finance- so the problem is that ASEANs living out of their means are going thru correction- it will pass lie NEKKEI perpetual correction- don't ever forget export dependent economies cannot afford to cut down on imports- Japan with all it inwardness is largest importer- they are mostly island economies and not isloated from the world- they put things together for that import is as important as export.

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