Dear Ron, In the forum of global capital markets, hedgefunds/speculators do not attack a countries currency and stock market unless the prey shows deteriorating economic conditions that have yet to be reflected in its capital markets. A yen at 120, as the Japanese MOF thinks is fairly reasonable, does not reflect the economic turmoil and banking debacle plaguing Japan. In my view, we speculators and hedge funds are merely adjusting a target country's markets to reflect fundamentals. When the fundamentals of a country turn sour but its markets do not, the country can suffer more if no adjustment is made to the markets. How? Just think what the Japanese growth rate would be if the yen were still at 120 instead of 145. It would be far worse than any figure imagined by an economist. The Soros' and Robertsons of the world, as wells as us armchair participants are doing the Japanese a favor by shorting yen, as it benefits exporters, and JPN is primarily an exporting country. In HK's case, the HK$ is pegged so the next best thing to do is short an HK financial institution, like HSBHY (HSBC plc). As an example of why we would do that, take a look at the chart of MBK (Bank Tokyo-Mits.) and a chart of the yen for the comparable timeframe. The charts are the same, because banks are most negatively effected by currency weakness.
Also, since the whole root of this Asian meltdown lies in the JPN banks, it makes sense to prey on HSBC, as the world financial community sends a message to HK that because of their neighbors' sickness, they too are subject to contamination, an it should justly be reflected in HSBC, which makes up over 30% of the Hang Seng Index weighting. Also, take a look at HSBC's most recent results. Net income down 16%, and they recorded a sharply higher loan loss provision. The Company itself warns of continued weak results do to the Asian mess.
So, in conclusion I believe the answer to each Q in your response is yes.
If you disagree, give me 1 good reason to buy JPN or HK now. |
