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To: Diana R. Chambers who wrote (7115)	1/15/1998 8:04:00 AM
From: Ramsey Su	Read Replies (1) \| Respond to of 152472

Diana, off topic In no particular order, we covered a number of subjects of interest to me: Regarding IMF imposed reforms, he thinks Korea, Thailand and Indonesia have no choice but to implement, though unlikely that they will be doing a whole hearted 100% turnaround. However, he believes that even if they do a 60%-70% job, it is enough and should be a substantial improvement to the business infrastructure of the region. He does not have a lot of opinion on Japan except that he is surprised that they have dragged their feet for so many years. Whether Japan's problems, mainly banking, are more deep rooted than publicized is anyone's guess. My main concern is China. Surprisingly, he is optimistic. The current leader, Jiang, and the likely successor, Chu (not sure if I am spelling their names correctly) are very pragmatic. He cited that Chu, so far in the last 4-5 years, has been successful in managing China's growth in an orderly fashion, without the major side effects such as unacceptably high inflation. This is hell of an accomplishment considering all the obstacles and the complexity of economy. Regarding the issue of over capacity, China has recognized the problem already. They have been controlling expansion and foreign investment, much like the US, by adjusting tax incentives. They are more selective in the industries, such as high tech, that they welcome. Regarding real estate in China and corresponding bank loans (bad), China has curtailed building residential units which were intended for "foreign" purchasers. Since many are financed with funds from sources other than tradition sources common to us, they can in theory sit empty for a while with less consequence, just no earnings in the asset in the mean time. They believe their reserve is indeed strong and banks have bad loan problem for ages. Is it just part of the government or just some deficit spending as we know it here in the west. Further more, he thinks China's interest rates are artificially high, using inflation and growth as yardsticks. This remains a monetary policy that they can use as a trump card to stimulate the economy as needed. HK, he believes, will diminish in value as a conduit for China. The pressure on the HK$peg is in theory off because the biggest assets, stocks and real estate, have already "devalued" the HK$ without touching the peg. Speculators are still in hope of a run by the masses. If all Hong Kongeses convert their HK$ to US$ tomorrow, the peg will most likely fall. In summary, I read that he is somewhat optimistic. It is going to be painful for many economies as businesses close, unemployment rises, real income diminish etc. The respective markets in Asia has already taken huge hits. Using Indonesia as an example, he questions how much further can it drop? After giving his comments some thought, I think the US market is still in the early phases of feeling the impact of the Asian contagion. E releases so far are addressing the past and not the future. I personally have no way to gauge of the magnitude. Upcoming E estimates are about as unreliable as I have ever felt. Still trying to figure out the best investment strategy for the situation. Any ideas? Ramsey