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Strategies & Market Trends : JAPAN-Nikkei-Time to go back up? -- Ignore unavailable to you. Want to Upgrade?

To: JBL who wrote (1581)	11/9/1998 2:47:00 AM
From: fut_trade	Read Replies (1) \| Respond to of 3902

My view of Japan is based largely on the overcapacity for production high-tech and consumer products that has developed in Asia, but it leads to the same conclusions. ---- Hong Kong stocks remain depressed in afternoon HONG KONG, Nov 9 (Reuters) - Hong Kong stocks remained lower on Monday afternoon, weighed down by profit-taking after market gains of the past month, brokers said. The Hang Seng Index was off 194.37 points, or 1.92 percent, at 9,945.38 after hitting a low of 9,906.44. Turnover was HK$3.56 billion. ''If the market cannot rebound above the 10,000 level, probably we will see the market entering a short-term correction,'' said Ricky Tam, senior research analyst at Delta Asia Securities. Tam expected the blue chip index to meet support between 9,500 to 9,800. Brokers said concerns that the government might sell off some of its HK$118 billion Hong Kong stock portfolio hampered trade. The government's holding company, Exchange Fund Investment Ltd, has said it is in no hurry to sell its shares and would unload its holdings over a long period in a manner that keeps Hong Kong markets stable. If the HK gov't pulls this one off it will be something!

To: JBL who wrote (1581)	11/9/1998 5:13:00 PM
From: chirodoc	Read Replies (1) \| Respond to of 3902

Marc Chandler: Downward Spiral for the Yen By Marc Chandler Special to TheStreet.com 11/9/98 3:45 PM ET As Federal Reserve Chairman Alan Greenspan observed early signs that U.S. capital markets were normalizing, capital-market conditions in the second-largest economy became significantly less normal. In a nearly unprecedented development, short-term Japanese interest rates dipped below zero last week. Negative interest rates were evident in two markets: the Japanese government T-bill market and some short-term deposit rates by Western banks. Last Thursday, the Japanese government auctioned approximately $13.6 billion in T-bills. The sale of six-month T-bills, for example, produced an annualized yield of a minuscule 3 basis points. In subsequent trading, the bills rallied, dropping the effective yield to minus 4 to minus 6 basis points. Published reports suggest that several banks, including J.P. Morgan (JPM:NYSE), Citibank and Barclays (BCS:NYSE ADR), were simultaneously offering negative interest rates on short-term yen deposits. Indicative annualized rates on two- to three-month time deposits were quoted at minus 3 to minus 6 basis points. The official three-month London Inter-Bank Offered Rate for yen remained positive, but, at 39 basis points, was the lowest on record. Two forces are driving the interest-rate developments. First, Japan's financial sector remains paralyzed, despite the passage of the government's bank-reform initiative. Depositors, including some Japanese banks, are unwilling to place money in Japanese banks. The demands of capital preservation in this risk-averse environment dictate taking a minor loss rather than exposing oneself to a potentially large loss, for which the odds appear to be high. Second, Japanese banks are in need of dollars to finance their overseas operations -- and ahead of the calendar year-end. On credit-quality grounds, Japanese banks have been forced to pay a premium over benchmark lending rates, but now there is a new wrinkle: U.S. and European banks have become reluctant to lend dollars to Japanese banks altogether. Instead of lending, some Western banks have been reportedly entering into currency-swap agreements -- swapping dollars for yen. Contrary to what many currency pundits would have us believe, Japan's demand for dollars is so strong that these banks are now sitting with substantial yen holdings. There is sufficient profit to be made from the currency swap itself that Western banks can accept a small negative interest rate on Japanese government T-bills. The Bank of Japan may not be dropping yen from helicopters as some economists had advocated, but it is making plenty of liquidity available. It has stepped up its monetization of the deficit by increasing the amount of government obligations in purchases through operations like rinbans (similar to U.S. coupon passes). Less well known are the BoJ's direct purchases of private-sector obligations, chiefly commercial paper. Commercial paper consists of promissory notes issued by companies instead of using bank overdrafts. Banks were the traditional holders of commercial paper. The BoJ historically has not played a significant role in Japan's commercial-paper market. However, over the past year, it has been quietly buying commercial paper. By the end of September, the BoJ had acquired 5.61 trillion yen (roughly $47.5 billion) of commercial paper, or an incredible 40% of the market. The BoJ recently indicated plans to step up its purchases of commercial paper. The Financial Times quoted BoJ Governor Hayami: "Due to concerns about the [Japanese] banks' foreign-denominated fundraising, there are strong upward pressures, even in the domestic market, on rates for borrowing. The bank has decided to purchase commercial paper more aggressively. We will take all measures to supply ample funds to the market." Like many market observers, the BoJ had expected funding pressure to ease after the end of the fiscal half-year at the end of September. Some reports indicated the BoJ intended to reduce its commercial paper holdings to 4 trillion yen. However, rather than subsiding, funding pressures have increased in recent weeks. There have been some suggestions that the BoJ is considering purchasing commercial paper issued by banks for the first time. The dearth of bank lending to businesses has become so acute that the Japanese cabinet is also thought to be considering buying corporate bonds through quasigovernment agencies like the Japan Development Bank. Simply put, the BoJ is attempting to fill the vacuum created by Japanese banks abdicating their role in the distribution of capital. Recall that at the end of October, the BoJ injected 3 trillion yen into Long-Term Credit Bank, of which as much as 2 trillion yen are believed to have been lent to other weak banks through the money market. The BoJ has increasingly taken on the function of the key intermediary in Japan's financial markets -- to risk, in other words, becoming the "lender of last resort." But while it is providing an alternative source of funding for Japan's private sector, the liquidity being provided to Japanese banks is not translating into new lending or stimulating the economy. It is not alleviating the credit crunch because the liquidity is quickly ending up at foreign banks. The supply of yen exceeds its effective demand, the net consequence of which is negative for the yen. Last week, the yen depreciated 2.7% against the dollar and 1.2% against the mark. The dollar has been trading in a fairly clear range between 114 and 120 yen. After flirting with the lower end of its range at the end of October, the dollar has recovered and is now trading near the upper end of its trading range. A convincing move above 120 yen would allow the dollar to challenge the next level of resistance seen in a band between 125 and 128 yen. The mark can also begin recovering from its slide against the yen. The mark has potential to rise 5% against the yen before the end of the year, or to roughly 74 to 75 yen.