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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (69)	12/23/1997 6:05:00 PM
From: Rational	Read Replies (2) \| Respond to of 9980

I felt like responding to this: <<AT THAT ONE WONDERS WHETHER THIS WHOLE ASIAN CRISIS WON'T BALANCE OUT AS A GIGANTIC CURRENCY DOWNDRAFT WHICH IS ONLY TEMPORARY.>> Yes, very truly! Temporarily, however, Malayasia and other SE Asian nations will be hobbled because of heavy borrowing from the West. Until this debt is paid off and reliance on IMF continues, they are forced to do this and that. While removing corruption is an important thing being imposed by IMF, I do not see why exorbitant interest rates be charged on IMF loans except to exploit the situation. Just imagine that IMF raises money at 6% and generally charges a rate of about 9%, but now S. Korea will have to pay 18%. As a result, S Korean market rates have gotten worse than the money-lenders of Stone Age because IMF is behaving as one. An important point to note is that IMF is not granting any largesse to S Korea or Indonesia. Firstly, IMF is collecting a high rate of interest. Secondly, it is forcing S Korea to sell its assets at abysmally low rates. Thirdly, it is preventing S Korea from declaring a debt moratorium. Fourthly, it is trying to stop the spread of the contagion. True, S Korea also needs help because it does not want to be isolated globally. This mutual benefit is good. But, as the only monopolist capital supplier, the IMF/WB dictates the terms -- many of which are rational and others appear extortionary. [S Korea or other S E Asian countries are not as aggressive as Brazil to declare debt moratorium.] Asian countries have learned a lesson -- a costly one -- to moderate their debt in future, export as much as possible to pay off the current debt, eat less and save more. This will have a tremendous negative effect on the rest of the world (IMO), contrary to what the IMF is now forecasting. [IMF, rating agencies (Moody's, S&P) and the rest of the world were having such a great opinion of the S Korean economy only a few weeks ago! I read IMF/WB/IDC reports with a pinch of salt. I know the economists who write such reports by simply extrapolating past data which have little revevance for the future.] Coming back to your main point, I agree that a SE Asian country will ultimately have a tremendous leverage once she pays off her debt by exporting a lot and importing only the necessities. This is feasible because many American companies have their factories in SE Asia and so export will not be affected much. Sankar

To: Worswick who wrote (69)	12/23/1997 8:59:00 PM
From: B Tate	Read Replies (2) \| Respond to of 9980

Worswick - Generally speaking the attitude is wait and worry some. Seems most are waiting for Chinese New Year and Hari Raya (Muslim New Year) to be over with. Historically the share market has taken a dip prior to the celebration of Chinese New Year. Folks are waiting to see HOW much of if any it will go down in the next 3 -4 weeks. The money supply has been basically shut off, no financing of new cars or properties. I'm hearing that some property financing may continue after Bank Nigara issues new guidlines. (will probably allow us ex-pats to continue purchasing with 'hard' currency. ;-)) For now the pollicy on new or used auto purchases is cash and carry. (Expect 50% reduction in the number of new car sales in '98) Price hikes are now starting to find their way into the market for some of the basics, chickens, sugar, fuel etc. Not extreme yet but there anyway. Malaysians in general have learned from their neighbors to the north, and are wary the same situation will occur. While real estate over production is huge here, it may not be as severe as Thailand. Many of the MEGA Projects have been "delayed" but many are to the point of being nearly completed and probably should be. I think part of the problem was that many infrastructure projects were delayed to provide the consistent 8+% annual growth everyone crowed over. Now they have to catch up and picked the absolute wrong time/caused it to be the absolute wrong time. The impetus was the coming of the Commonwealth Games in Sept. 98. The government wanted the world to see a vibrant modern country with all the amenities of a world power. Now I fear visitors will see instead a half finished construction site. We won't know the answer about potential recovery until Feb/Mar. If the gov't takes further strong action this country will recover rapidly. If the egos get in the way who knows. BT