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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (560)	7/22/2001 3:53:03 AM
From: craig crawford	Respond to of 1643

JULY 23, 2001, VOL.158 NO.3 Sinking Feeling With U.S. demand slowing, Asia's economies are hurting. How bad will the regional slowdown be? And who can expect to take the hardest hit? time.com BY MARK R. MITCHELL Drastic measures had to be taken—and fast. On July 8, President Chen Shui-bian summoned 34 of Taiwan's brightest minds to the presidential palace, put them in a conference room, and told them not to come out until they had a plan for fixing the shuddering economy. .......................................................................................................................... This is how it is all over Asia. Calculator punchers have spent the past couple of weeks apologizing for their earlier, relatively rosy forecasts. Now they say the next six months could bring the most dismal growth since the financial apocalypse that hit the region in 1997. Singapore looks to be headed toward full-blown recession, while things in Taiwan haven't been this bad since the early 1970s. Currencies most everywhere are getting clobbered. Stock markets are comatose. And you could just about paper over Bangkok's skyscrapers with all the pink slips Asia's companies are handing out. ............................................................................................................................ But it's no heavenly being that is doing them in. It's America. Asia's economies are fueled largely by companies making cars, consumer electronics and all manner of high-tech gewgaws and shipping them overseas. Exports account for more than 70% of Malaysia's and Singapore's GDPs, while the figure is around 50% in Taiwan, Thailand and the Philippines. The problem is, about about half of those shipments go to the U.S., which is dealing with its own economic travails. American consumers and corporations just aren't buying like they used to, and so Asia's warehouses are overflowing with unsold goods. To make matters worse, about 40% of the stuff Asia makes for the U.S. is electronics, mainly components like microchips, motherboards and monitors—the parts for the computers that U.S. dotbombs stopped buying after the tech boom went bust. The result is that Asia has been hit with what Arup Raha, chief economist at UBS Warburg in Hong Kong, calls a "double whammy" of depressed U.S. demand for all goods, and a particular slump in electronics, the cornerstone of Asia's new economy. Taiwan's exports plunged nearly 17% in the second quarter. Singapore, South Korea, Thailand and the Philippines are not faring much better. ............................................................................................................................... Even if technology took off again in the U.S., lack of reform is likely to keep growth rates in much of Asia slow for a long time. How long could depend on the one country in the neighborhood that is not in bad shape: China. The forecasts for China's future are a bit like harried traffic cops on Shanghai's streets pointing in two directions at the same time. The nation is not nearly as vulnerable to export slumps because its own consumers are spending like mad on everything from cars to vacations at Angkor Wat. That could well keep growth rates at the current 7%. But China also has other big problems—most notably corruption—that threaten to stifle growth. Either way, there is a general consensus that China is a serious competitor to the rest of Asia. And assuming nations in the region don't orchestrate a turnaround soon, the current slump might provide China with an opportunity to steal the show. Many foreign investors already shun Southeast Asian nations in favor of China's huge market and cheap manpower. The $1.9 billion that Motorola spent on a semiconductor plant in Tianjin last year was more than the company has invested in Malaysia in the past three decades. Equally worrying for Asia are people like Choi Man Jin, head of Union Metal, a small assembler of air-conditioning parts in the Nandong Industrial Park, west of Seoul. Choi says he has halved his staff, and his orders have all but dried up. Hurt badly by Korea's high cost of labor and the economic slump, he is thinking about moving to China. Hundreds of his compatriots have already gone, and big companies in Taiwan, Malaysia and Thailand are doing the same. "China has the potential to wipe Southeast Asia off the map as a manufacturing base," says Michael Enright, a business professor at Hong Kong University. "These nations are going to have to find new sources of growth."