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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: BillyG who wrote (29890)	2/24/1998 8:48:00 AM
From: Rarebird	Read Replies (2) \| Respond to of 50808

Why China will devalue its currency and bring Cube's stock price down hard: China's transformation into a market economy has benefited from an infusion of capital from 3 main sources: high domestic savings, a high inflow of foreign direct investment and a massive increase in foreign reserves due to its trade surplus. Today, all three are on the decline. Domestic savings have been absorbed by the increase in gov't bond issues used to fund the privatization of uncompetitive domestic industries. Foreigners have scaled back investment in China for various reasons, among them a realization that payback is much slower than first thought, the costs of corruption are too high, and other investment alternatives offer better value. Finally, China's terms of trade have deteriorated in line with the fall in the baht, ringgit, and peso. Unemployment in China is on the Rise. Wages are under pressure. The banking system is being strangled by bad debts which may be as much as 25% of total loans. Chinese cities ( my sources tell me ) are littered with empty apartment buildings and office towers, many of which are so poorly constructed that even basic amenities are unavailable. The expectations of its 300 million person labor force are being shattered. The additional 850 million peasant farmers who have been considering moving to the cities to catch a piece of the miracle are just begginning to find out that they missed the boat. There are already riots and protests in some provinces, but so far these are being crushed in the typical Chinese approach to dissent. What Asia and World Markets are counting on and praying for, and what China has tentatively promised the world, is that despite the growing societal tensions, China will bite the bullet and not devalue. If they hold to that promise, the world has to be ready to accept a merciless response to China's civil unrest. I think, however, that domestic order will soon become more important than regional stability and China will be forced to devalue. If and when they do, the rest of Asia's currencies will experience the next wave of decline and CUBE's stock price will get crushed and cut at least in half! With the IMF effectively tapped out, Japan unable to help, and Greenspan and Rubin's warnings of a 1990's Domino Theory falling on Congressional deaf ears, the pain in Asia will be both longer and more severe. Nobody is yet stepping up to buy the factories, condos and office towers on Southeast Asia's landscape. The banks are still exposed , and the Japanese banks are still exposed to them. Forgetfulness is sometimes a wonderful thing, but the piper will be paid by shareholders of Cube.