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Technology Stocks : Deswell Industries (DSWL) -- Ignore unavailable to you. Want to Upgrade?

To: Ron Bower who wrote (971)	9/9/1998 1:27:00 PM
From: Ron Bower	Read Replies (1) \| Respond to of 1418

Related to my projections a year ago about the strength of HK/China versus the rest of Asia. GREATER CHINA WEATHERS THE STORM DAVID SAUNDERS and DUNCAN HUGHES in New York The divide between Southeast Asia and greater China's economic performance is widening as the regional downturn worsens, a United Nations report has found. Despite holding up well in the early months of the economic turmoil, foreign investment was expected to fall substantially this year in those countries most affected by the downturn in the region, the United Nations Conference on Trade and Development report said. Commenting on the report, author and consultant David Dodwell said: ''The corporate landscape has changed dramatically. Companies from Southeast Asia and Korea have virtually disappeared off the map. ''There has been literally decimation of corporates there. They simply don't have the capacity to raise capital any more.'' The report found high interest rates, tight liquidity and dwindling confidence would result in a substantial drop in outward foreign direct investment from countries most affected by the downturn - Indonesia, Malaysia, South Korea and Thailand. The report showed that foreign bank lending fell dramatically last year, turning negative, while foreign portfolio equity investment also slipped. Developing Asian economies were also expected to be affected by the evaporation of outward foreign direct investment flows because almost half of their investment was from other developing Asian countries. However, investment inflows into the five most affected Southeast Asian countries remained stable last year and the report said there was room for ''cautious optimism'' for it to remain positive if not at last year's US$16.4 billion. There has also been the threat of a backlash against foreign companies which were allegedly exploiting difficult economic conditions to strengthen their market position. In contrast to Southeast Asia, the greater China region fared better, underlining the fact that economies in Hong Kong, the mainland and Taiwan were more resilient than recent sentiment suggested, thanks to strong currencies and intact corporates. ''Hong Kong companies are not among the walking wounded. I think analysts have underestimated just how flexible and robust Hong Kong companies are,'' said Mr Dodwell. Foreign investment by Hong Kong companies last year equalled $26 billion - more than the total for the nine key Southeast Asian economies, including Singapore and the mainland. The report added: ''In the longer term, it can be expected that outward foreign direct investment will resume its upward trend, because the fundamental determinants - marketing and management know-how, accumulated technological capacity, especially in the medium-technology industries - can be expected to reassert themselves.'' ************************** Should they devalue the $HK or Rmb? Not according to this. HK/China companies like Deswell will have problems short term, but long term they will be the ones that survived and have the capability to expand. As global economies weaken and consumer demand decreases, the weak companies are disappearing. Imagine a plastics company most anywhere in Asia trying to buy resin on credit versus Deswell waving $US and asking for their best cash price. That other company can't go to the bank and get working cash when the bank is telling them they have to pay down their notes. As these companies disappear, it creates a new level of demand that will be met by the survivors - the well managed companies that have the cash liquidity. JMHO, Ron