I would like to make a correction, or rather a clarification, since it appears that my thoughts are going out on the wires to many places. First, let me say that I stand by everything I have posted about both Japan and Hong Kong. I need, however, to clarify today's post with respect to a comment made about the situation in Korea. I am guilty of writing in haste, and including a general comment in a specific situation. I made a comment about Debt/Equity ratios in Korea that was general. It is a fact that Korean firms use very much more leverage than western firms would find acceptable, and there are Korean firms with D/E ratios of over a thousand. I do NOT, however, know what the D/E ratios of any Korean auto or steel manufacturers are, and the way I poorly phrased the sentence in the post, I almost certainly led some of you to believe I was talking specifically about them being around 1,000. Again, I do not have any data on the D/E ratios of these particular firms. However, I do believe that they used large amounts of debt to ramp up production in anticipation of continued growth in exports to the SE Asian region, and those growth projections are now lining the bottoms of bird cages. I know they used debt to do it, because I heard a panel of analysts of the Korean Auto sector discuss the situation on "Asia Business News" last week.
They did mention that some of them had hedged some currency risk, but that almost certainly applies to sales that have already been made but not paid for, and has nothing to do with declining future sales. I do not know that the doom of these firms (both auto and steel) is certain, but I think their outlook is very poor. One other thing that I do not know, which plays into this whole situation is the extent of the participation in that debt of Japanese banks. Japan has been the creditor to the whole of East Asia for years. If their participation is large, well, you draw your own conclusions. Now, here's hoping I haven't created an international incident. ;-)
jess |
