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

To: Don Earl who wrote (129)	12/25/1997 1:21:00 AM
From: Rational	Read Replies (1) \| Respond to of 9980

Don: I am offering some counter-balancing thoughts to yours. << 1. US factory costs in Asia related to labor and production have been reduced by a third because of currency exchange rates.>> This appears true now. But, the workers in these American companies in Asia will demand more wage (they have already done so) up to a point of equilibrium. These workers are skilled and so their wage will have to rise to the cost of living which has gone up quite a lot. << 2. Short term borrowings in US dollars by competing Asian companies have increased by1/3 due to exchange rates. This will force many Asian companies out of business and make facilities available for US expansion at pennies on the dollar.>> This is not a very meaningful statement because when a company loses all its equity, it is pennies worth and if some Americans are willing to run the baggage for pennies, they will be most welcome. I do not think Americans or others are stupid to buy such companies even for pennies. For companies that are worth a lot, there will be competition to acquire. On average, the acquirer gets -.4% and the acquired receives 20%! Observe that the crisis is mainly due to Asians pulling out of their own currencies and so they have hoarded their wealth. S Korea has an estimated US$ 80 bil hoarded by Koreans. This will come out as soon as the laws are relaxed. Thus, the competition for acquisition will come from all including Asians, Asian Americans, and others. << 3. Control of insurance and banking will shift to the US.>> This is a wishful thinking because even when the British, who colonized various parts of the world, could not achieve this goal. The British robbed as much as they could like the diamonds from India, but could not control the banking/monetary system. [This is no offense to the gentle British society. It just refers to those explorers who happened to be British.] Even within the US, different states (especially southern states like Texas) have succeeded remarkably to control their own regional banking system. The US has taken so long to pass an inter-state banking law in 1996!! << 4. Exports to the US will increase but the profits will be going to US companies with operations in Asia.>> Asian exports will increase, but I am not sure about American companies' profits. Observe that Seagate, which has one of the largest American plants in Asia, has lost heavily even during a period when the currency has fallen about 40%, not accounting for the hedging losses which they still carry in their books. The competitive pressure has reduced profit margins for all companies. Consumers everywhere have benefited. <<5. Consumer prices in the US will drop because of lower production costs, which will create a bigger market for electronics and computers.>> They will drop everywhere. <<6. Profit margins for US companies with factories in Asia will increase dramatically in 1998.>> This is a wishful thinking, IMO. << Am I the only bull in a bear market?>> I think you really are and I wish you good luck in your investments. I am not saying that values of some companies will not appreciate or that the DJIA or S&P500 will fall or rise. [The problem with DJIA or S&P500 is that they replace companies that do not perform or are not expected perform.] Sankar

To: Don Earl who wrote (129)	12/25/1997 9:59:00 PM
From: pcyhuang	Read Replies (1) \| Respond to of 9980

An exception for Taiwan Hi, Don: Your statement that "Control of insurance and banking will shift to the US" just could not happen in Taiwan. According to current Taiwan regulations in regard to foreign investment, investment in a local company by a foreign investor may not exceed 10%, and total foreign investment in a local company cannot exceed 25%. Moreover, the limit to the overall local investment by a foreign investor cannot exceed US$600 million. Nontheless, Citicorp's operation in Taiwan has been enormously successful, primarily because of its introduction of innovative banking techniques and products... Best regards, pcyh