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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (58183)	1/3/2005 5:58:36 PM
From: Snowshoe	Read Replies (2) \| Respond to of 74559

That was in India!

To: RealMuLan who wrote (58183)	1/3/2005 6:01:01 PM
From: RealMuLan	Respond to of 74559

2005 offers a wave of opportunity TIMES NEWS NETWORK[ MONDAY, JANUARY 03, 2005 01:31:08 AM] The year gone by was sweet for most, though the tsunami left a bitter aftertaste. Little can be done about nature’s caprices, but human vagaries are sometimes equally impenetrable to common sense. A year ago, analysts had looked forward an added bounce out of the recessionary conditions of 2001 and 2002, primarily in the US, but also in Europe and Japan. There was a reason to nurture this belief as the US third quarter GDP jumped by 8% and Japan’s fourth quarter GDP by over 6%. Much of 2004’s positive expectations have indeed been met. Global output (in PPP weights) grew by a record 5% and the volume of world trade by over 8%. The US economy will have grown by about 4%; the Euro-zone seems back onto a trajectory of 2%. About Japan, there is some uncertainty as data revisions reduced first nine-month growth to below 2% in November, then raised it in December to over 4%. The British, Australian and Scandinavian economies have done much better. Investors in financial assets have been richly rewarded, perhaps by a little less than those who invested in commodities — particularly, petroleum and gold. Exchange rates have been choppy, and interest rates have as expected, risen. The massive US current account deficit now stepping into its sixth year, coupled with the runaway budgetary deficit, mounting house-hold debt and increasing reliance on international capital flows to finance and re-finance accumulation of debt has had its inevitable impact. Through all the choppiness, the US dollar has dropped against the Euro, European and Australian currencies. However, that won't help matters much; the US has its largest trade deficits with Japan and China and their currencies have remained glued to the greenback. The upshot of this very partial currency adjustment, is that euro, sterling and Swiss assets have begun to start looking expensive, which coupled with the desire of the Asian central banks to support the US consumer (and her ability to borrow cheap) still provides enough support to the greenback. Most funds have their home balance sheets drawn up in US dollars and to that extent over-estimate returns on the US financial assets (Dow is up 3.6% in 2004 and S&P 500 by under 9%), but the direction that events are taking will surely undermine this basis. In the case of non-dollar funds, the US assets have generated negative returns, and private capital — which formerly financed much of the US current account deficit — have turned shy. The upshot of all this is that investors will be forced to increasingly focus on emerging markets, especially Asia, which have the most persuasive growth stories and where currencies are set to rise. The continued economic strength of Asian economies is in many ways the most significant development that has come out of 2004 — the beginning of a shift in global focus , the start of an inexorable process. No longer is the Asian story only about cheap manufacturing and off-shore facilities (still important though it is), but also about the rise of enormous home markets that will propel economic activity across the globe. It is also a sustainable story, somewhat unlike the (foreign) debt-financed consumer expenditure led growth in the US. Just as the tsunami of December 26, tectonic changes in the global economic process promises to bring prosperity into Asia and give her a chance to become a far bigger player. India is also well-placed to gain, but much will depend on what our policy makers make of it — to gain minimally by default or maximally by design: the choice is ours. economictimes.indiatimes.com