Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Worswick who wrote (5629)	8/18/1998 9:51:00 AM
From: Sam	Respond to of 9980

Clark, Your friend's take on the Japanese pension funds has the ring of total truth to me. I will believe it until the Japanese government starts buying yen with a vengeance. The emperor has no clothes. s.

To: Worswick who wrote (5629)	8/18/1998 4:42:00 PM
From: Paul Berliner	Respond to of 9980

Actually, I believe the Japanese pension funds are relatively safe... How can they guarantee an above-money market rate of return when the yields there are currently so low? Japan is the largest holder of U.S. Govt. Secs.- I mean hordes of 'em. They collect enough interest off of them to cover the pension liabs. However, when the JPN Gov. attempted to prop up the Nikkei over 18,000 by the end of 3/98 (the JPN FYE), that put pension yen at risk, and people complained. So they won't try that again, I believe. Still, the public savings in Japan and the overall wealth of their nation is so great that they can easily weather this storm. This isn't Indonesia. JPN citizens are still largely unaffected by the Asian meltdown. That's why they keep dragging their feet. They can't see the forest from the trees, so to speak. The JPN Gov can easily pay off all the bad loans on the banks' balance sheets, but they are not going to because the Gov. would accumulate a big deficit. They keep searching for a way to do the bare minimum to remedy their problems, and they'll continue searching for a long time, I believe. If you want to short HK, the best thing to do is buy puts on Chinese ADRs, where available. Notice how the Hang Seng reacts more negatively to the yen's slump than the Nikkei. This is all because of the peg. If the peg is broken and a new exchange rate for HK$ and China's Renminbi is announced, HK markets and the red chips that trade there may plummet. Templeton emerging market fund, for instance, has shares in CHL and HSBHY. If they are met with a flood of redemptions, they have to sell shares. A 20% devaluation will net the fund 20% less cash than it would otherwise receive had it sold the shares prior to the devaluation. That's why as they dollar pounds the yen, the Hang Seng falls harder than the Nikkei, because the yen ain't pegged and the HK$ is. HOWEVER, as we realized with the Ruble's devaluation, which didn't effect the Russian equity markets as much as anticipated, the devaluation seems to be ALREADY PRICED IN. If the HK Gov. or China does devalue, I now feel that the markets will not crash, as everyone who held shares has basically sold already or gone short or hedged themselves. Thus, should China devalue tonight, I don't expect a 10% drop in HK. Most popular Asian ADRs have options because speculators demand the leverage. Straddling HK options may be the way to go, because you're expecting a violent move in either direction, and you know that the stock will not stay at their current levels. Politics will see to that. We all know either 1. China will devalue or 2. the HK Gov. will buy into the market again or 3. the problems will somehow be remedied, so 4. the stocks are all set to move either way higher or way lower. Happy trading!