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

To: MikeM54321 who wrote (8195)	3/5/1999 9:34:00 AM
From: Paul Berliner	Read Replies (1) \| Respond to of 9980

Maybe the market will have another irrational 'relief rally' if the Yuan is devalued, like when the Real was cut loose. It's hard to say that a Real devaluation was already priced in because the market had already been on such a tear. The effects will be felt though - just read Reynold's Metals recent earnings release: newsalert.com

To: MikeM54321 who wrote (8195)	3/5/1999 12:47:00 PM
From: Sam	Read Replies (2) \| Respond to of 9980

Mike, "Then there's that old argument about Asia's problems keeping world inflation down to the almost non-existent level. I don't think I can recall anyone 19 months ago predicting how incredibly well this appears to have worked!" Well, this has been alluded to by AG and others. We are actually benefitting in this regard by the closed Asian markets. Since Western companies were limited in their exports to the region, the damage that could have been caused by the crisis was limited, and the benefits from the devaluations increased, as the cost of goods went down so dramatically. To take one example that I am familiar with: when the Thai devaluation occurred in July 97, Seagate announced a big hit to their earnings because they had, being the largest private employer in Thailand, dabbled in the baht futures market on the wrong side. But they claimed that the hit they would have to take would be offset by the decrease in their operating expenses. Whether that transpired or not is impossible for me to say (since ASPs in the disk drive market took a dive for many reasons), but it indicates the two sided nature of the crisis for the US.

To: MikeM54321 who wrote (8195)	3/5/1999 3:39:00 PM
From: Ron Bower	Read Replies (1) \| Respond to of 9980

Mike, I have been reading 'yuan devaluation' projections for the 19 months and have posted against it many times. IMO it would not be good economics for China to devalue and the leadership understands this. 1. Unlike most of SEA, China is not dependent on exports as they amount to less than 20% of their GNP. Rather than devalue, they have been subsidizing exporters thru tax incentives, low interest loans, and direct payments. Most exporters have been able to compete as raw materials and many other costs are based in $US. They are being hurt more by the overall SEA reduction in consumer spending than the level of the yuan. 2. A devaluation would prompt another round of global devaluations in emerging market currencies negating any desired benefits. 3. Foreign debt would be more difficult to pay, new debt more difficult to obtain. They have enough problems with this already. 4. China must import certain commodities and a devaluation would be inflationary. 5. They have promised to not devalue and would lose face. Almost every article I see that suggests a devaluation is based on a specific reason and ignores the whole picture. When the entire economic and psychological impact are viewed, a devaluation would do more harm than good. These projections of a devaluation are hurting China's ability to obtain foreign investment - along with Gitic, China A&B companies losing so much money, negative press, and constantly changing policies. However, the loss of foreign capital is more a matter of the overall poor economy in SEA than the above because most of the investment was coming from Japan, Taiwan, and South Korea. From what I'm reading, only Europe is still actively investing in China. JMHO, Ron