Tom,
I wonder if the following story is going to have an effect on the HSI? The weakening Yen is going to be trouble for Hong Kong. It is going to apply a lot of pressure on China to devalue their currency. The weakening Yen, appears to be getting only weaker. And that is pretty worrisome.
I agree completely with your previous post about the Asian Flu not effecting US markets because of the US markets HUGE liquidity. How do you think the US market will react if China devalues? Don't you think that the US markets will finally get the message, that Asia is hurting badly?
MikeM(From Florida)
>>Friday May 15, HONG KONG, May 15 (Reuters) - Peter Churchouse, who has maintained a bullish view of the Hong Kong market throughout the turmoil in the region, turned to a more bearish stance on Friday saying Japan's economic troubles threatened recovery in Asia. The managing director of Morgan Stanley Dean Witter Asia, who in January set a year-end target of 15,500 to 15,800 points for the Hang Seng Index, said on Friday a fall to between 7,000 and 8,000 points was possible over the near term. His new year-end target is 13,500 points.
''The big difference in my mind, which has changed my thinking since January, is really Japan,'' Churchouse said. ''At beginning of the year, we had a view that Japan would grow at about 1.5 percent. We now believe it is going to be negative about half or 0.7 percent,'' he told Reuters. Churchouse said Japanese officials also seemed willing to tolerate a significant depreciation in the yen. ''Both of those factors put a lot of pressure on economic recovery in Asia, they put a lot of pressure on currencies. That in turn puts increased pressure on the Chinese economy and also raises the risk that the Chinese could at some point abandon their commitment to a fixed exchange rate policy.''
Churchouse noted that Chinese officials were starting to criticise Japan for allowing the currency to slide. ''That signals perhaps that the Chinese are trying to soften the markets up or soften the world up generally to provide an excuse or a reason for them to take a different line also.'' The added risk in the market, which was pushing up local interest rates, together with an expected slowdown in Hong Kong earnings growth, has led Morgan Stanley to cut its weighting in the Hong Kong market to underweight from neutral.
Churchouse said he expected earnings growth to slow to three percent in Hong Kong, from a previous forecast of about eight percent, with asset-writedowns hurting corporate results. His forecasts assume six-month HIBOR at about nine percent. Real Gross Domestic Product growth is forecast to slow to about 2.0 percent from a previous forecast of 3.0 percent.<< |
