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Pastimes : Ask Mohan about the Market
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To: Joan Osland Graffius who wrote (12395)12/26/1997 9:43:00 PM
From: geewiz  Read Replies (2) of 18056
 
Hi Joan,

I have been suprised how little research the brokerages, even ones that handle the red chip offerings have on the Chinese economy. It is the failure of planned economies that have mis-allocated so much of the investment capital in SEA. The main difference in the SEA planned economies and the Chinese planned economy is that one gets capital from overseas investors through mutual funds and is allocated into infrastructure projects or office towers or golf courses favored by the ruling party or family, while the other panned economy gets capital internally from the party five year plan and is allocated into projects run by military generals. Both make the mistake of letting something other than market demand allocate resources. But because the Chinese are internally funded it is a lot harder to gauge the extent of the problem. It could be this will keep the pressure off China to devalue. But then we are getting reports of excess inventory, so how will they unload it with Asian sales flat to down?

Another thought I had on this; the plan looks like Shanghai will surpass Hong Kong as the financial capital of China, how this will be handled? The Chinese need foreign exchange badly and they won't let Hong Kong continue spending their reserves to support the HK dollar. Severing the peg to the US dollar would serve both of these goals.

Sure would appreciate others thoughts on this!

Happy Holidays, art
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