Jess,
If you read my post, I totally agree with you on the problems of Japan and the ASEAN countries. I also agree that it will cause complications for HK and China banks. However, they have not relied on foreign capital as the other banks in the region and have large reserves to defend both the currency and bank solvency. I don't feel you can legitimately apply the problems of the region to HK and China.
I think we both understand that the 'crisis' in Asia was due to Japan/ASEAN ignoring the threat China's conversion to capitalism brought to the area. Formerly successful companies began losing money and, instead of cutting back, they went to the banks for more. The banks, instead of forcing the companies to honor prior commitments, extended them additional credit at higher interest rates. This continued until the first default caused the whole mess to fall.
China devaluating the Rmb would exasperate the Asian situation causing further devaluation of other currencies and a cascade of bankruptcies, companies=banks=governments, throughout all of Asia. Fortunately, the Government of China realizes this and has vowed to keep the Rmb stable. This position has been repeatedly stated. We must not forget that China controls it's own currency value, not the market.
China has chosen to stimulate it's economy by spending vast amounts of monies on infrastructure and telecommunications. At the same time, they are reducing the cost of government, privatizing government owned businesses (to raise additional capital for infrastructure), plus other programs designed to make Chinese businesses more competitive.
Hard times for China? Yes, but they have designed excellent plans to make sure the hard times are nothing like the problems facing the rest of the region. Current unemployment is 2.9% and it will be going much higher, but the government spending and industry growth will offset much of the austerity of the other programs.
For China, their totalitarianism is an asset with the right people in charge. They need not cater to voters, unions, external pressure, etc. in their efforts to maintain a stable economy.
Some companies in the region have been operating very conservatively and are in an excellent position to capitalize on the current situation. My post was in reference to Deswell because it is one of the companies that will benefit the most. With no debt and US$30M cash (have always kept cash in $US), they are in position to benefit from manufacturing in China and the financial problems of other companies in the region. They have been constantly expanding, showing 50% annual growth from internally generated funds, and are now in a position to make acquisitions or further expansion. There are other companies in the area with similar operations that will do very well.
Not meaning to argue, just present my view. I feel certain HK/China companies to be an excellent place to invest at a time when others have bailed out and companies are selling far below value.
For what it's worth,
Ron
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