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

To: Zeev Hed who wrote (7182)	10/17/1998 8:10:00 AM
From: Tundra	Respond to of 9980

Zeev, My apologies for misspelling your name in an earlier post. It was unintentional. Regards, Tundra

To: Zeev Hed who wrote (7182)	10/17/1998 8:41:00 AM
From: Ramsey Su	Read Replies (2) \| Respond to of 9980

Zeev, I wish I can share your bullish tone. Having a little time to reflect on the recent chain of events, I am concerned that the other shoe(s) has yet dropped on the unsuspecting. Let us start off with Greenspeak. Mr. Greenspan, I know it is not popular in Washington to do so but try telling the truth in simple English. A few FOMC meetings ago, I opined here that Greenspan has lost all credibility when he was pounding the table on inflation, higher wages, rate increases etc. It was a lie and he knew it was a lie, strictly for the purpose of manipulating the masses to avoid irrational exuberance. Now is a total reverse. A good Fed Reserve Chairman is one who is invisible. A good monetary system is one that is stable and predictable, not one that swings on the moods of one man. Greenspan, in pursuit of his moment of glory as the almighty, has destroyed the system on Thursday. Together with Clinton, these two have severely damaged a great political system for years to come. Trying to be objective, I wrote a few notes to myself as a reminder of the good and bad news which may affect the market. On the good list, there were: Fed Fund rate cuts, Brazil stabilizing, IMF funding, Japan opposition approving bail out plan, positive earning surprises. Almost all are on the table now. The bad list: Fed inaction, the discovery of Fed rate cuts and no impact, Brazil falling, no IMF funding (which may be good news), Japan revealing depth of bad debt problem and links to other parts of economy, negative earning surprises, the street recognizing 1999 will be a no growth yr and adjust estimates (PE will skyrocket), China failing at 8% growth rate and bank failures. While most items on the bad list are occurring, none may be factored in the market yet. It is almost laughable that despite of admitted failure by the IMF in Asia, they are doing the same thing to Brazil. Doesn't Camdesus understand austerity, which by the way means economic constraint due to lack of consumer goods per Webster, is most likely going to generate the same results for Brazil and SA as SE Asia? While Japan did agree on some type of a resolution, has anyone reported on how much it is going to cost the Japanese economy? Without Japan, what are the chances of an Asian recovery in the foreseeable future? The Nikkei appears to be the only one who got the message. While reported earnings appear to be not far from estimates, has anyone paid attention to how far they are below last yr and earlier estimates? Furthermore, how much does forward estimates have to be revised? China has been out of the limelights for a few months. Not much attention is being paid to the GITIC and GZITIC "failures(?)". Is this the beginning of a trend? Is this part of Zhu's economic reform plan? China has proven to be far more proactive than Japan. Is Zhu going to start letting state supported banks, businesses and ventures fail if they cannot stand on their own merits? What would that do to the institutions who loaned money to China? In conclusion, I can only suspect that last Thursday marked a turning point. Now that all the good news are out, what would be driving force to hold me the market? Sorry for the long rant. Got up too early this morning. Ramsey

To: Zeev Hed who wrote (7182)	10/18/1998 11:08:00 AM
From: chirodoc	Respond to of 9980

1520 October 18, 1998 MARKET INSIGHT Elizabeth Allen of Japan Fund By KENNETH N. GILPIN ntil the Federal Reserve Board cut interest rates again and Congress agreed to more than $90 billion in financing for the International Monetary Fund, the biggest development last week in the effort to stave off global recession seemed to be made in Japan. After numerous false starts, Tokyo announced a $500 billion plan to rescue ailing Japanese banks. Western officials, who have been pressing the Japanese to shore up their banking system, hoped it would help pull the Japanese economy out of recession. Those were the hopes. But as the details filter out, the plan appears to offer less rather than more. Elizabeth Allan, a portfolio manager at the Japan Fund for the last 11 years and a student of the country for more than a quarter-century, put it in perspective during a telephone conversation from Tokyo early Friday morning. Q. What role do you think Asia, and Japan in particular, played in the decision by the Fed chairman, Alan Greenspan, to cut rates? A. I think the reason he did it is because the Japanese stock market has reacted so weakly to the bank package. As of Thursday, the market was actually below where it was when the package was announced. Q. The bank program was billed as one that would reform Japanese banks, allowing the healthy to survive and the weak to fail. It doesn't do that, does it? A. This is a bailout, not reform. I think the system needs to be reformed, but the politicians have a different view. They much prefer a muddle-through approach rather than a dramatic one, and seem to have retreated from an approach which calls for a stringent inquiry into the health of the system. Q. Still, we're talking about half a trillion dollars. Won't that help? A. On a short-term basis, it does look as though the stimulus that is part of this announcement will have some positive impact on the economy, even though it will help most of the country's traditionally strong interest groups the most, like agriculture and real estate interests. Q. Consumers are seen as another troubled element in the economy. Have you seen evidence that demand is picking up? A. I have been here about a week on this trip, and one of the things I have been looking at is the retail sector. As I wandered around shops last weekend, there were mobs and mobs of people out, but not many were walking out of the stores with shopping bags. That tells me people are interested, but in terms of actual purchases it looks somewhat subdued. Q. What was the talk? A. One of my favorite sources to find out what folks are thinking is taxi drivers. I had one on Thursday who was utterly scornful of the bank package, saying that everyone involved in the package lied to the people. He also said that until there is confidence in the system, there will be no change, and that consumers are not so easily fooled. That is exactly the point. Until there is some way of knowing which banks are solvent, the whole economic infrastructure is suspect. Q. You are not exactly describing an economy on the mend. How do you invest the Japan Fund's money under such conditions? A. We have tried to maintain a balance between unexciting but attractively valued domestic names, and there are some, even in a weak economic environment. I have also been looking at Japanese pharmaceutical companies, which until recently had a fairly low profile on the international scene. Some of the larger-cap names are Takeda, Yamanouchi and Chugai. Q. A year ago, some people were saying Japanese stocks were cheap. They are even cheaper now. What sort of advice do you give to someone considering investing? A. It is important to be very selective investing in Japan at this point and has been for some time. But for those with a time horizon of five years or more, it is important to realize that at some point Japan, an important country with many strengths, will come out of this. Q. What sort of indicators suggesting a turn is coming are you looking for? A. The most important ones are a reduction in capacity in many areas, starting with the banking system. If they try to keep every bank alive then even the best ones will be hard pressed to make a profit. But it is not limited to banking. It is also true in a number of other sectors, from agriculture and retailing to manufacturing. Q. Will the rest of Asia remain sick until Japan gets well? A. Most people would say the rest of Asia can't rebound without Japan. A stronger Japan would be a positive. But Asia is going to need to think about planning for its short- and mid-term future without the help of a stronger Japan.