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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (10226)	11/22/1997 11:30:00 PM
From: P.Prazeres	Read Replies (1) \| Respond to of 94695

thanks for the site , Bill. Paulo

To: William H Huebl who wrote (10226)	11/23/1997 12:48:00 AM
From: Elllk	Read Replies (1) \| Respond to of 94695

Saturday November 22, 10:36 pm Eastern Time Asia battles nerves, braces for renewed onslaught By Sarah Davison HONG KONG, Nov 23 (Reuters) - The hands and voices of Asian currency traders and analysts trembled last week as the South Korean crisis unfolded, confirming once again what a ruthless place the market can be. Nerves were frayed, assisted in part by headlines in some newspapers such as last Thursday's Financial Times, which ran an editorial headlined ''A threat to the world.'' Japan must recapitalise its banking system now or expose the world to a panic-driven, global debt deflation, the FT said. "Markets are in a panic," said one Hong Kong trader. ''It's like this. Korea is just one part of the picture. It's another domino. It's a bigger one, but it's not the only problem. It just happens to be the domino of the week. And I'm not prepared to speculate on the next domino.'' South Korea's capacity to infect Japan with economic disorder shocked investors who watched in horror as the won plunged relentlessly throughout the week. The unit recovered slightly on Friday following news that South Korea was considering accepting help from the International Monetary Fund. But, as the trader said, South Korea was simply the latest domino, and while the worst and most immediate fears of global recession have faded, the risks -- at least in Asia -- remained. Further currency attacks were considered inevitable, provoking amazement at the severity of Asia's punishment. ''This currency crisis has gone far beyond what I expected,'' said Charles Li, chief economist at NatWest Markets. Since the start of July, Thailand's currency has fallen about 35 percent with its stock market off 26 percent, Malaysia's ringgit has slumped 27 percent and the stock market fallen 48 percent, Indonesia's rupiah has fallen 31.5 percent and its stocks 46 percent and the Philippine peso is off 22 percent while stocks are down 34 percent. Even safe-haven Singapore has suffered, with the Sing dollar down almost 10 percent and its stock market down 17 percent. And while Hong Kong's U.S. dollar peg has held, the Hang Seng has crashed 30 percent. The viciousness and relentlessness of the attacks prompted calls for global leadership last week. Unnerved by the South Korean situation, analysts demanded the Group of Seven industrialised nations step forward and calm markets. ''People are going ... to say, 'There's something wrong with our exchange rate mechanisms here.' They are introducing unnecessary volatility,'' said one Hong Kong strategist. Many were asking why Asia was suffering so badly, with sentiment rather than fundamentals clearly in the driver's seat. ''I think the reality is pretty negative but the market expectations have come close to outright panic, particularly on the part of foreigners,'' said the strategist. ''I do think it's right to carefully monitor the situation and not be panicked but it's difficult to say that to people, because then they accuse me of being overly optimistic -- but I'm not. They either expect me to say the world is coming to an end or buy the (heck) out of everything.'' Eric Nickerson, head of currency research at Bank of America, said one reason markets were so volatile was a lack of transparency that exacerbated Asian markets' inefficiencies. ''A lot of the surprise in this is that a lot of people didn't see, and I'm not sure people still feel confident that they know exactly, how much unhedged debt is out there. In that type of environment, the market begins to speculate,'' he said. Analysts also said Asian volatility had been exaggerated by hedge funds using derivatives to combine attacks on both currency and asset markets. ''The problem is when a country endures some temporary pain, this pain is magnified one hundred or even one thousand times by globalisation, hedge funds and derivatives,'' said Guanon Ma, co-head of research at Salomon Brothers. Credible policies were the solution, he said. But some tough nerves would come in handy while Asia gets its house in order. ''It's no secret exchange rate markets overshoot,'' said Miron Mushkat, chief economist at Lehman Brothers in Hong Kong. ''I'm not quite sure they are the best judges of good behaviour but markets do reward good behaviour. Governments (in Asia) have not always been consistent with market demand and so the markets have come back with a vengeance,'' he said.