The voice of one crying in the wilderness......
I just heard some things by an analyst who actually seemed to know what he was talking about on the CNBC Asia edition, and I thought I might share them with you.
There has been some feeling that the worst of the Asian Crisis is over. It it not. The markets here have rebounded on optimism that is now fading. Only South Korea has really bitten the bullet and actually made some of the necessary reforms, with the result that foreign debt funds are pouring into the country now and it looks like the worst is over there, although there will still be some painful times for individual South Korean citizens. Elsewhere, in places like the Phillipines, Malayasia, possibly Thailand and particularly Indonesia, the worst is probably yet to come. The optimism was fueled by the hope for a quick fix; Money from Japan, IMF intervention, the monetary board in Indonesia. In very few places have the real tough reforms been instituted. Case in point, the banking sector. Banks have to provide liquidity. That liquidity comes in part from loan repayments (supposedly with interest) to fund new loans and provide depositors with liquidity. Since many of the loans in these countries are bad, there SHOULD have been a drying up of liquidity as firms were liquidated and assets sold off at a loss. There has been no such occurance. Why? It turns out that the banks have simply been printing money as needed! This has two unpleasant consequences. (1) It allows technically bankrupt firms to limp along when the damage should be recognized, but worse, (2) it means heavy inflation is on the way. Thus, we are now getting a string of currency downgrades from people like Moodys warning that these currencies are headed South versus the dollar.
Here in Hong Kong, the monetary authority maintains that the interbank rate (now at between 12 and 13%) will have to be kept there until the regional currency woes abate. Given the above, guess when that will be.
I'm out of semis (still) for the near term. I may be missing the rally (indeed I am) but I think Asia is on the way back, and not in a good sense either.
jess. |
