Godo morning Margaret,
Yes I am in rare form as I like to be on top.
I saw this article this morning from reuters:
Sunday October 26 2:13 AM EST
FUND VIEW-Hong Kong mkt's global impact exaggerate
By Sarah Davison
HONG KONG, Oct 26 (Reuters) - Hong Kong's 10-percent stock market crash on Thursday sparked a global share sell-off, but Asian fund managers cautioned against overplaying Hong Kong's role in the
global shake-out.
''I don't think the (global) downturn will last for very long. I think it was kind of a knee-jerk reaction,'' said David Descalzi, senior portfolio manager at Prudential Asia.
''U.S. equities, they may plunge under their own weight, but I don't think it'll be driven by Asia.''
Following the 1,211.47-point, 10.4 percent plunge on Black Thursday, the Hang Seng recovered nearly seven percent to close at 11,144.34 on Friday, paring the week's losses to 18 percent.
But U.S. stocks ended sharply lower for the second straight day on Friday, succumbing to renewed investor jitters about the impact of Asia's financial crisis on U.S. corporations.
The blue chip Dow Jones Industrials index sank 132.36 points, or 1.7 percent, to 7715.41, adding to Thursday's 187-point fall.
London's FTSE index also crumbled, shedding another 21.3 points to end below the key psychological level of 5,000 and bring its weekly losses to more than 300 points, or six percent.
However, Descalzi said the U.S. and European markets should benefit from cash flowing out of Asia.
''Some companies are going to get hurt, but as a percentage of total corporate earnings, in the U.S. it's small, and probably smaller still in Europe,'' he said.
Rather than moving from one market or region into another, global investment appeared to shift away from equities into fixed income instruments, fund managers said, with U.S. treasuries rising as Hong Kong equities fell.
It was too early to claim any permanent switch between asset classes in portfolio allocations, the fund managers said, partly because ever-present inflation jitters in the United States also played a big role
in last week's switch into fixed income.
With U.S. Federal Reserve chairman Alan Greenspan looking increasingly unlikely to raise interest rates immediately, treasuries have become more attractive.
''And even if he does raise rates, whatever minimal loss you sustain on your longbond price would probably look a lot better than the losses you might incur holding equities in these markets,'' the
fund manager said.
For Asian fund managers, the only option was to raise cash.
Hong Kong was the region's last safe haven -- although some with a mandate including Australia and Japan joined the trend and moved into fixed income instruments in those denominations.
''Everyone was overweight Hong Kong and they had to raise cash all of a sudden,'' said Franklin Lam, head of research at SBC Warburg.
But Thursday's action simply added momentum to a switch that was already occuring.
''We've been getting out of Hong Kong over the past couple of months,'' Gary Greenberg, deputy managing director at Peregrine Asset Management, said late on Friday afternoon.
''We cut our weightings and hedged where we could. But to be honest we just unwound our hedges about half an hour ago.''
The stock market fell on Thursday as Hong Kong authorities raised interest rates to punishing levels to deflect currency speculation on the Hong Kong dollar, but rates eased on Friday as the assault
appeared to subside.
-- Hong Kong Newsroom (852) 2843 6470
REUTER |
