Wendy, each of the rim countries has different sets of problems to address, but I do not think thatthe rim is going down the drain. By mid year I think that the through in their problem will be visible (not the actual through, but the "hope" that the problems can be resolved and a new economic equilibrium established), and that is what will signal the resumption of the bull here (and there as well). Right now, however, we are going to be fed more and more bad news, who knows, the Rupiah may have to go to 30,000 to the dollar (and a new Rupia issued) before the down trend is completed. Indonesia strength is natural resources rather than manufactured goods, and thus they are going to eventually resurface. Korea's chaebols are starting to face the music and are engaging in restructuring and shedding side line business, that will reduce overcapacity in some segment and set the stage for a recovery there as well.
Is there an outside possibility of a worldwide deflation taking hold and spiraling into a depression? In some of those countries definitely (in terms of "strong currencies), but I personally do not think that the impact here or in Europe will result in more than 1 to 2% price declines. Such "mild deflation" will actually be an fuel for the market to roar ahead since these will be accompanied by lower long term interest rates.
Zeev |
