jmt, OT
I'll point out that a devaluation of the $HK or the Chinese yuan would not negatively effect Deswell. If the yuan were to devalue and other regional currencies stay the same, it would be a positive.
At this point I had to cut a response because it got ridiculous in length and I couldn't seem to shorten. As it is, it got long because the question just cannot be answered briefly.
I'll say this. Since the Asian 'crisis' began over a year ago, pundits and analysts have been predicting a devaluation of the yuan and that the peg on the $HK would be broken, yet none of the arguments would stand up to scrutiny when faced with the facts. I maintained then that they would not devalue and would be using incentives to aid exporters. This is what has happened so far.
I now say that current projections of devaluation bear less weight since the situation in both HK and China, while still bad, are showing signs of improvement.
China's foreign exchange reserves - I don't see the relevancy of accuracy. What does it matter if the numbers are accurate or not? If wrong, they are only lying to themselves because the yuan is not traded. Are these numbers more critical than the greatly understated non-performing loans of Japanese banks? How accurate are the numbers of any government including the US? (My wife is a supervisor for the census bureau and I don't trust the numbers currently being put out by our government.)
The pundits are doing the same thing you have in your post. Using past data to support a position. As investors, we should not use the past, but look at trends and the what the future will bring. The monies that are 'now' going into the US Treasury market are coming out of the US, L/S American, Russian/Eastern Europe, and other markets just as the monies that 'were' going into Treasuries and US equities came out of Asia. Investors put cash in Treasuries until they can find a better place to invest and will not be happy with a yield of 5% or below. We are already seeing a transfer of Asian monies out of Treasuries being offset by the influx from other markets.
As the problems in L/S America impact US business and banks, we will see a downward adjustment in both the market and the $US. The $US/yen has fallen from 147 to 136 range, so one could say the $US is already devaluing. (With it, the $HK and the yuan) While the US, European, and L/S American markets are in for more rough times, we are seeing some strength in the primary Asian markets. Look at what's happening to the China indexes, Japan seems to have stabilized, most all but the ASEAN markets are showing signs of strength. The 'bad' news is in their pricing, it's just begininning to be reflected in the other markets.
I might be wrong, but I don't think I am.
JMHO,
Ron
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