Worswick,do you believe in Merrill??? if you do,here is what they say.
Asian assets cheap, offer global values, says Merrill
Hong Kong
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11 FEBRUARY
ASIAN assets now offer value on a global level, with the worst of the selling in currencies and stocks perhaps over and economic difficulties throughout 1998 already reflected in prices, Merrill Lynch said.
''Asia is where the global values appear to be. Both stock markets and currencies are extremely depressed and sentiment is overdone on the downside,'' the US investment bank's chief investment strategist Charles Clough said.
''Asian assets are cheap, particularly in US dollar terms. In Asia, we remain overweight on Taiwan, the Philippines and Thailand,'' he said in a report released yesterday. Merrill Lynch said while economies were likely to see hard times for a while, the negative case at current prices was based on one premise - ''that there is no way out''.
''The emergence of current account surpluses in economies like Korea and Thailand would gradually build a bid for their currencies. Once currencies stabilise, stocks can recover even though economies are depressed,'' Mr Clough said in the report.
The financial sector was restructuring, particularly in Thailand and Korea, and corporations were downsizing and selling assets. ''Investment inflows should slow, but asset sales could offset much of that,'' Merrill Lynch said. A key fundamental for Asian stabilisation could be China's success in stabilising the renminbi, he said. ''A devaluation would have devastating consequences in a region where devastation already exists. It would unleash another round of collapse in other Asian currencies, threaten depression and even greater global deflationary tensions.''
''China is a large enclosed economy and it has room to reflate and stimulate demand. Moreover, China is largely an intermediate processor with an increasingly value-added export sector. ''Our sense is that its current account surplus is not likely to be under severe assault and the combination of domestic productivity gains, rapid consolidation of its state-owned enterprises and a domestic recovery could take pressure off the currency,'' Clough said. Merrill Lynch said while fundamentals in Asia were set to worsen, the point of greatest liquidation in both currencies and stocks may be past and markets had discounted the difficulties ahead.
''Asset prices are cheap and the combination of cheap currencies and cheap assets in a world where asset inflation is more common makes Asian investment nearly unavoidable.'' - Reuter
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