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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (7602)	9/6/1998 6:29:00 PM
From: djane	Read Replies (1) \| Respond to of 22640

9/21/98 Forbes. Reports from the trenches [Positive TBR references] global.forbes.com Get out? Stay in? Buy on dips? FORBES GLOBAL reporters asked managers of some of the best global debt and equity funds how they see markets moving in the months ahead. By Elizabeth A. Amery and Justin Doebele Arthur Byrnes, New York Deltec Latin American Fund (high-yield bonds): "It is not 1929. The U.S. and Europe are in far too good a shape to be at that level of risk. The recent strengthening of the yen takes some pressure off Asia. But there isn't going to be a snapback like 1987 because Japan and Russia first need to be fixed, and they need more than bandaids. The 500-point drop [on Wall Street] was a way to bring the market back in line with the rest of the world. An interest-rate cut is already in the market. There has to be some more unwinding of leverage, which is maybe 80% complete. We are near a bottom-the Dow Jones will hit 7200. We will test that level in six to eight weeks, if not sooner. "Russia and Latin America are way oversold, even if the Dow goes to 7200. Russian stocks are penny options on the country's continued existence. In Latin America, this is a perfect opportunity to get rid of your third-tier companies. Why own the squirrelly-stuff when you can own a Telmex or Telebras [at cheap prices]?" Carlos Gadala-Maria, Miami JPBT DMA Fund (short-term bonds): "You will need a strong stomach, but Latin America still looks attractive in both bond and in stock markets, where valuations are very, very good. [As a defensive move] I have raised my fund's cash position to 10%, up from the normal 1% to 3%. That's still less than during the Mexico peso crisis, when I was between 15% and 20%. The region has grown up a lot since then. Right now I'm buying one- or two-year dollar-denominated Mexican paper. The prices more than compensate for the risk. I think Mexico has the best capacity to repay dollar debt in the region, and has probably the best managed economy in Latin America today. Yet [the one- and two-year paper] I'm buying is paying 800 to 900 basis points over [comparable] Treasurys. "I'm not buying Brazil, but I'm also not selling it. They have the type of fiscal deficit that got Russia into trouble. The government has pledged to cut it. I'm confident that [President Fernando Henrique] Cardoso will be reelected [in October]. When that happens, he will have four years to address the deficit issue. I would probably take [his reelection] as a buying opportunity." Charlotte Schmid Stary, Zurich Credit Suisse Equity Fund Pharma (specialty stocks): "This is different from 1929 and 1987. I don't think we're in a bear market, I just think this is a temporary correction. The fundamentals are basically good, interest rates are low, and there is still growth in the market. I reduced the liquidity in the fund. Short-term it's hard to know if there might be higher volatility, but longer term I think this is a good buying opportunity. I have increased positions in companies like American Home Products, Merck, Pfizer and Medtronic, just big blue chips. The sentiment in the smaller and mid-caps is still kind of shaky. "I'm now fully invested. What is always a danger is that when the market has a serious correction, individual investors and even institutional investors lose their nerve, but I think drug stocks are a good defensive investment to be in. I haven't sold anything but if there are redemptions I will have to. I'll look to decrease holdings in companies with less visibility and with fewer products." John Horseman, London GAM Universal DM and US$ Fund (balanced): "I view the recent declines as profit-taking rather than evidence of fundamental change. But there are a few long-term concerns. "The first is that U.S. interest rates are out of sync with the economy and corporate earnings. The market would actually welcome signs of economic weakness because that would hasten an interest-rate cut, which is necessary. The risk is that if the economy stays strong, the Fed will do nothing. As a result I have decreased holdings in U.S. brokerage firms. "Another concern is that the domestic recession in Japan is starting to affect exporters' earnings. I have been selling Japanese electrical exporting stocks. "GAM doesn't think this situation is similar to 1987, when bonds fell before equities did because of anticipated inflationary pressures. There were then declines in equities, followed by lowered interest rates. Today, bonds are firm. Real interest rates are unsustainably high and should come down." Diego Espinosa, New York Scudder Strategic Global Themes Fund (stocks): "We're in a period of global deflation and intensifying price competition. We've been focused on Europe because we think the European companies have the most potential for restructuring and cost-cutting. It's companies that have cost-cutting ahead of them, rather than behind them, that will weather price competition. There hasn't been much demand growth in developed markets. The growth in earnings you've seen has come from restructuring rather than volume growth. [But] since we've already been through the greatest period of restructuring in the 1980s and 1990s, it's more difficult for companies to maintain margins in the face of price competition. "We've basically been invested for the past 12 months in anticipation of this instability and volatility. We actually haven't been doing much as a result of the recent volatility because we were positioned for it to begin with." \| back to top \| Read more: Top Stories From September 21, 1998 Issue c 1998 Forbes Inc. Terms, Conditions and Notices