Another, "Asia's problems are good for the US equities markets story." I would say this spin is getting a little long in the tooth. This author even goes so far as to say, if we don't get the flood of imports, it's a danger signal! Then the last paragraph puts a whole new spin on the problem. Juan Nevado says even if the flood comes, it will be bad. Can't win for losing it seems. But at least it's a different spin.
Then there's Alan Greenspan yesterday, doing a very nice job, with Robert Rubin, explaining why they want IMF funding to pass the House's approval. Greenspan is concerned with exports from this country, as he should be. He said we have to get the Asian economies back in shape so they will buy US goods. This was his total focus. He and Rubin did a fine job explaining it all (IMHO).
MikeM(From Florida)
>>Coming Asian Export Boom Could Hold Key for Stocks
By James Saft
LONDON, May 22 (Reuters) - The survival of the three-year bull run in Western stock markets may hinge on Asia's ability to right its capsized economies and begin to pump out exports, analysts and fund managers said on Friday.
The connection: a flood of low-priced imports from Asia, if it comes, would cool price inflation in the U.S. and take pressure off the Federal Reserve to raise interest rates. ''If those exports don't come, bond markets will start to worry and they will worry significantly about if inflation can be kept low,'' said Peter Knapton, managing director at Legal & General in London.
An interest rate rise in the United States would undermine equity valuations there, fund managers said, and pose serious knock on effects for shares in Europe. In testimony to Congress on Thursday, Federal Reserve Chairman Alan Greenspan showed that Asia was weighing on his mind, saying, ''...the effects of the Asian crisis on the real economies of the immediately affected countries, as well as on our own economy, are only now just being felt.''
Analysts had expected Asian exports to skyrocket as producers took advantage of newly competitive currencies, but so far the boom has failed to materialise. Over the three months to the end of March exports from the five core members of the Association of South East Asian Nations -- Malaysia, Thailand, Singapore, Indonesia and the Philippines -- were down five percent, according to Santander Investment.
''Our judgement is that the exports will flow. That will keep inflation subdued and will allow interest rates to remain low for a long time. That supports equity valuations and indeed should allow them to go up.''
Juan Nevado, strategist at Prudential Portfolio Managers, takes a different view, holding that an export boom in Asia will coincide with a general economic turnaround in the region that will increase the risk of rising interest rates. ''I would argue that when it becomes clear that Asia is going to export its way out it will increase the risk of a tightening (in interest rates),'' he said. U.S. shares would then be doubly vulnerable, he said, both to profit shocks from cheap imports from Asia and from potentially higher interest rates.<< |
