Thread,
I don't think the below comes as any surprise to those of us that have been paying attention to HK/China. - Ron
Greater China weathers the storm
DAVID SAUNDERS and DUNCAN HUGHES in New York
The divide between Southeast Asia and greater China's economic performance is widening as the regional downturn worsens, a United Nations report has found.
Despite holding up well in the early months of the economic turmoil, foreign investment was expected to fall substantially this year in those countries most affected by the downturn in the region, the United Nations Conference on Trade and Development report said.
Commenting on the report, author and consultant David Dodwell said: ''The corporate landscape has changed dramatically. Companies from Southeast Asia and Korea have virtually disappeared off the map.
''There has been literally decimation of corporates there. They simply don't have the capacity to raise capital any more.''
The report found high interest rates, tight liquidity and dwindling confidence would result in a substantial drop in outward foreign direct investment from countries most affected by the downturn - Indonesia, Malaysia, South Korea and Thailand.
The report showed that foreign bank lending fell dramatically last year, turning negative, while foreign portfolio equity investment also slipped.
Developing Asian economies were also expected to be affected by the evaporation of outward foreign direct investment flows because almost half of their investment was from other developing Asian countries.
However, investment inflows into the five most affected Southeast Asian countries remained stable last year and the report said there was room for ''cautious optimism'' for it to remain positive if not at last year's US$16.4 billion.
Foreign, or transnational, companies investing in the region have already been attracted by falling asset prices, currency devaluations and ''fire sales''.
They have also taken advantage of the cost competitiveness of exports from countries whose currencies have been devalued.
There has also been the threat of a backlash against foreign companies which were allegedly exploiting difficult economic conditions to strengthen their market position.
In contrast to Southeast Asia, the greater China region fared better, underlining the fact that economies in Hong Kong, the mainland and Taiwan were more resilient than recent sentiment suggested, thanks to strong currencies and intact corporates.
''Hong Kong companies are not among the walking wounded. I think analysts haveunderestimated just how flexible and robust Hong Kong companies are,'' said Mr Dodwell.
Foreign investment by Hong Kong companies last year equalled $26 billion - more than the total for the nine key Southeast Asian economies, including Singapore and the mainland.
The report added: ''In the longer term, it can be expected that outward foreign direct investment will resume its upward trend, because the fundamental determinants - marketing and management know-how, accumulated technological capacity, especially in the medium-technology industries - can be expected to reassert themselves.''
The study found that worldwide foreign direct investment last year was more than $400 billion with expectations of an additional increase this year.
The driving force behind the rise was large-scale cross-border mergers and acquisitions among developed countries. |
