Thursday January 7, 12:41 AM
Biggs sees 20-30 pct 1999 US stock mkt correction
NEW YORK, Jan 6 - The U.S. stock market is poised for a large correction in 1999, and a U.S.
recession seems likely in the years ahead, although the timing is difficult to predict, Morgan Stanley
Dean Witter chief market strategist Barton Biggs said Wednesday.
"I'm sure at some point in 1999 we're going to have another important leg down (in the stock
market). I think from where we are now, it could easily be 20 to 30 percent," Biggs told Reuters
Television.
Asked about the chances for U.S. recession, Biggs said he did not know whether the downturn
would come this year or even next year, "but absolutely there will be a recession."
The strategist advised relative investors to underweight Brazil and approach the rest of Latin
America cautiously. Financial and economic problems in the region comprise a potential stumbling
block for the U.S. economy, he said.
"We would be inclined to be cautious on Brazil. The Brazilian stock market is already down a lot,
but I don't think an absolute investor has to own Brazil, and I think a relative investor should be
underweight Brazil," the strategist said.
"I think Latin America becomes a significant problem for the U.S. because of the amount of business
and exports and trade we have with Mexico and Brazil in particular," he continued.
But Biggs said Japan "has already been to hell and back" through recession, deflation and a domestic
bear market, and investments in the country seemed a good value.
"Japan is probably the best value in the world ... Japan is selling at a third of the value on
price-to-book and price-to-sales as the U.S., for example. So Japan is definitely value, but there is
no compelling reason to buy Japan yet," Biggs said.
A further rise in the yen, which recently hit a 27-month high against the dollar, poses a threat to
Japan, however, he said.
"I think if we see the yen really appreciate a lot further and JGB (Japanese government bond) yields
go a lot higher, you have to say that's bad for the Japanese economy, it's bad for the Japanese stock
market and it's probably bad for the world," Biggs said.
"I think the rest of Asia looks very good. I think that Hong Kong and Singapore, for example, look
very attractive," he added.
Biggs said he was "very optimistic" about Europe over the next two to three years because of the
newly unified euro currency.
"I believe the euro is going to work. I believe it's going to add roughly half of one percent to
Euroland's growth" to about 2.5 percent, he said.
|
