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

To: Esvida who wrote (1206)	1/19/1998 9:50:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 9980

Hey,it ain't over untill the fat lady sings,right? My appologies to all the 'fat ladies' out there,of course. Source: Money Talks (and ...well you know the rest) ------------------------------------------------------------------- January 15, 1998 Beware the Asian Economic Flu .. Obviously, It Ain't Over Yet! by Ray Devoe Ray DeVoe, the sage of Legg Mason Wood Walker, sees serious implications for Americans in Asian over-production. Asian price-cutting will hurt us, he says. This piece is excerpted to focus on the domestic implications of Asian Economic Flu. The stock market has been concentrating on the financial implications of Asian economic flu with very little attention given to the domestic implications. "Globalization," no matter how the market apologists rationalize it, has always been one of the major foundations of this stock market. Foreign trade, particularly with emerging markets, had never been a major factor in other bull market advances. This time it has been, and the prospect of continually rising U.S. exports to these markets has been unique. In this respect "New Era" proponents could legitimately say that, "This time it is different." However, the destruction of wealth in those Asian markets in the last few months has been phenomenal. Many nations are already in recession and the restrictions imposed by the International Monetary Fund will only make things worse. Many of these markets have been effectively removed as significant buyers for U.S. products. That's the "American Exports" phase of what looks to me like a three-part problem, with the financial implications being the first of the three. One of my reports on the drawing board for this year is tentatively titled, "Who is Going To Buy All This (Expletive Deleted)?" [Devoe's own deletion.] There is a worldwide overcapacity situation in virtually everything, from autos to plastics to semiconductor chips. The answer, for many of those emerging markets whose economies and currencies have been devastated, has been that the American market is now designated the "Importer of Last Resort. " For the last decade money has been thrown at these emerging markets almost indiscriminately. Funds have also been readily available in cheap loans, particularly from Japan. In addition, booming stock markets and high valuation levels made it very easy to raise money through that route. Some of it disappeared through corruption, some of it went into uneconomic vanity projects (World's tallest buildings in Malaysia and soon Indonesia), but a lot of it went into massive new productive facilities for almost everything. It has always been assumed in "the Asian Miracle" that global growth would be strong enough to absorb this capacity as it came on stream. Now it appears that this assumption was fallacious. ... With the domestic economies of those Asian countries in disarray, incredible amounts of wealth destroyed, and Japan and Europe having their own problems, the only place they can export to is the U.S. This will put even more pressure on prices in this country, since the Asian countries can only export here and they must sell their goods. A stronger dollar and their own devaluations give them even more leeway in cutting prices for the American market. The wild card could be China, which has not devalued yet and might have problems if it did. But if they do not export to this country they risk rapidly rising unemployment and civil unrest. That has not been a problem as long as their export market was booming and they could severely restrict imports into China. [Ergo, there will be] tremendous pressure on the profit margins of American companies. ... While deflation could mean lower raw material costs for many companies, an extremely tight labor market where costs must be increased to retain key personnel, [and] the loss of pricing power in the market, combined with the overcapacity worldwide for an avalanche of cheap imports into this country, would mean to me that Goldilocks has had it. This [ebullient] stock market, "Priced for Perfection" last August, no w has some ugly blemishes. (Back in July, devaluation and crash of Thailand looked like the problems of a tiny country far, far away.) Earnings projections for the S&P 400 already have started to come down, and the former consensus of up 13-15% for 1998 have come down to up 8-10%, with some market strategists already using flat to up 5%. Multinationals like Coca-Cola (NYSE: KO), Gillette (NYSE: G) and 3M (NYSE: MMM) have announced earnings shortfalls due to factors cited above. Some hits on earnings in the technology group have been spectacular. The problem is just starting... Business Week recently titled an editorial, "The Overcapacity Time Bomb." They mentioned the possibility of $400 million American trade deficit this year and the likelihood of a trade war... This was one of the few negative editorials I have ever seen in the magazine. ----------------------------------------------------------------------

To: Esvida who wrote (1206)	1/19/1998 10:56:00 PM
From: RealMuLan	Read Replies (4) \| Respond to of 9980

<< More like the nationalism ... Yes. Korean and Japanese people, mostly because of their geographic similarities -- island countries, they are very cohesive as a nation. When I was in Beijing, I worked as a trainee in national travel agency. I had some close observations on the differences between differet nationalities. For example, it is very difficult to guide a tourist group from Western countries, such as France, or the US, even if a small one consisted only a dozen people. It seems that each single person has his/her own differnt idea and time schedule. It is very hard to work as a whole group. But it is very easy to guide Japanese or Korean tourist groups, even if a group as big as more than 200 people. They are much more collective and can sacrifice their own personal interest for the group interest. I think this contributes a lot for their economic success.