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Technology Stocks : Deswell Industries (DSWL)

DSWL 3.390

-0.3%

Nov 7 9:30 AM EST

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To: jmt who wrote (920)	8/26/1998 12:48:00 PM
From: Ron Bower	Read Replies (1) of 1418

Peter & jmt, "You have just won the conservatives of the year awards. And Ron, in addition to predicting currency devaluations you are now a global economist. <g>" Call 'em as I see 'em -g- Toot my own horn a little. When the 'crisis' first hit most analysts and pundits were projecting a devaluaiton of the $HK and the yuan. My research indicated they would not. While I wavered recently because of the potential for deflation in China, I still hold the position. So far, I have been right. The fundamentals of China's economy do not warrant a devaluation. I have also said China would aid exporters thru incentives and tax breaks. They have been announcing many in the last few months. Some will be a boost to Deswell's bottom line. I am not saying that Deswell should not use cash to expand or that they should not be making acquisitions. I am saying that I don't think the time is yet right. There's still more problems to come. We have yet to see the impact of the Asian (and now Russian, but it's of minor concern) on the US economy. I believe it will start showing up in the next six months. Until Deswell has a better idea of where the US and European consumer markets will be heading, they should be cautious about jumping into anything that would hurt liquidity. I am bearish on the US market short term because investor confidence is low and, for the same reason, I project a decline in consumer spending. I think there will be better values for Deswell to look at in coming months and they need to be sure the sales will be there before they make the investment. If they don't pay dividends, we'd probably see a lower bottom line. Management gets untaxed dividend compensation versus salaries. JMHO, Ron

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