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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: TI2, TechInvestorToo who wrote (5620)	6/1/1998 2:03:00 AM
From: fred woodall	Read Replies (1) \| Respond to of 10921

"Blood running in the streets" This WSJ article might shed a little light for the bulls lurking in the background. HONG KONG -- The economic gloom across Asia is deepening as more countries appear in danger of sliding into recession. First-quarter economic contractions in Hong Kong and Malaysia all but ensure they will join Indonesia, Thailand and South Korea in the 1998 recession club, with Singapore and Japan strong candidates for membership. The unending stream of bad news from Asia is raising fears that the region's downturn will have a more severe effect on the world economy than anticipated. Economists and businesspeople elsewhere have tended to shrug off Asia's woes as a sideshow. That may be changing. "Global growth prospects are dimming as Asia's economic crisis intensifies and its impact spreads beyond the region," according to Chase Securities. Hong Kong's gross domestic product contracted 2% in the first quarter from a year earlier, and Malaysia's economy shrank 1.8% in the same period. The worse-than-expected first-quarter figures point to similar contractions in the second quarter, economists said. Barring a strong rebound in the second half, the full-year figures won't look much better. The surprisingly bad news from Hong Kong and Malaysia was compounded by new figures released from Thailand and the Philippines. In Thailand, manufacturing production fell 21% in March from a year earlier. Exports fell 3.5% in March from a year ago, the Thai central bank said, yet again puncturing hopes that foreign consumers will rescue Asia's battered economies. Meanwhile, the Philippines said that GDP growth slowed more than expected to 1.7% in the first quarter. Importance of Yen's Fate As Asia's economies struggle to revive growth, the health of the Japanese economy -- especially the yen -- has emerged as a key focus of concern. Even if the Japanese government's stimulus package of tax cuts and public spending pushes annual growth above zero, the fate of the yen, which late Friday in New York was trading against the dollar at 138.91 yen, is uncertain. If the yen weakens further against the U.S. dollar Asian currencies will remain under pressure, said Rajeev Malik, regional economist at Jardine Fleming Securities in Singapore. That means Asian central banks trying to maintain stable currencies would have little room to cut interest rates, intensifying the sharp downturn in domestic demand and further squeezing local banks and hard-pressed borrowers. The yen is making people nervous outside Asia, too. Lehman Brothers warns that investors world-wide have a bad case of the jitters. "Investors are now widely scared -- not too strong a word -- about what happens to the yen," said global chief economist John Llewellyn in London. Feeling Effects From Japan Ripple effects from Japan are among the factors that pushed Hong Kong's economy into a nose dive in the first quarter. A collapse in Japanese visitor arrivals that began last year continues to hurt Hong Kong's important tourism industry. Japanese banks, worried about shoring up balance sheets at home, are contributing to a credit squeeze in Hong Kong by pulling funds out of the rest of Asia. Hong Kong, a services center for the entire region, is also getting hit by the sharp downturns in other Asian economies. However, waning domestic confidence is probably the most important source of Hong Kong's woes. Property prices are down about 40% from their 1997 peak and consumers are in a state of shock. Businesses, too, are licking their wounds as asset values evaporate. "Basically, it's a huge financial and property bubble bursting," said Guonan Ma, regional economist at Salomon Smith Barney in Hong Kong. The government is painting the downturn as the inevitable consequence of an asset-price bubble that had to burst to restore Hong Kong's competitiveness. However, authorities are clearly worried that the downward trend is cutting deeper than anticipated. After the first-quarter GDP figures were announced the government unveiled measures designed mainly to boost demand in the tourism industry and stabilize property prices. Restrictions on the entry of tourists from Taiwan and China were eased. The government also rescinded some measures aimed at property speculators, allowing developers to sell unfinished apartments earlier and to a broader range of buyers. It also took steps to boost banks' liquidity with programs to buy up debt securities and mortgages. Likely Repeat in Second Quarter But with only a month left to go in the second quarter, that won't be enough to stave off a second consecutive quarter of contraction and an official recession, economists said. Most are forecasting that GDP will contract in the second quarter and many now predict it will shrink for the full year. "Nothing has happened" in the second quarter to suggest GDP growth has improved, said Sun Bae Kim, a regional economist at Goldman Sachs in Hong Kong. "My sense is that second-quarter figures are likely to be negative." Asia's other services center, Singapore, had already announced strong first-quarter growth of 5.6%. However, economists expect its economy to slow down as problems in Malaysia and Indonesia feed into Singapore's open economy. "It is going to see one or two quarters of negative growth," Mr. Malik said. The extent of Malaysia's first-quarter contraction was a surprise. Although many economists predicted growth would slow sharply in Malaysia this year and possibly sink into negative territory, the first-quarter result was poorer than most expected. The darkest shadow over Malaysia's economy is a surge of investment in property projects that are just now reaching completion, prompting many economists to predict that things will get worse before they get better. Confusion over government policy is also clouding the economic outlook. Thailand's grim March statistics show the country's recession has deepened. The only Asian country so far officially in recession, the 21% decline in manufacturing output underscores the terrible toll on the real economy of the currency and banking crises. Worst Over in the Philippines? The Philippines is doing relatively well, all things considered. Weak first-quarter GDP growth of 1.7% shows that the Philippines hasn't escaped the effects of last year's depreciation of the peso and the continuing regional slump. However, exports are holding up as the country continues to reap gains from a recent surge in foreign investment. Manufacturing output grew 1.3% in the first quarter. The Philippines is getting an added boost from overseas workers employed in economies with strong currencies. Remittances from abroad helped gross national product grow 2.5% in the first quarter. (Gross domestic product doesn't include remittances from abroad.) "With the end of the El Nino drought and the steadily improving macroeconomic environment, we believe that the economy has already weathered the worst part of the crisis," said Socio-Economic Planning Secretary Cielito Habito. The economy may have "already bottomed out" in the first quarter, said Luz Lorenzo, an economist at Peregrine Securities Philippines, who predicts GNP growth of 4.1% and GDP growth of 3.5% for the full year.