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

To: jbe who wrote (8523)	4/22/1999 8:58:00 AM
From: Ron Bower	Respond to of 9980

jbe, I leave the 'Big Picture' to those that understand it. I don't think there's any doubt that a correction in the DOW and Nasdaq would cause a major drop in ALL the world's markets. From your article, "As stocks rise confidence grows." As near as I can tell, the HSI and the Nikkei are far too high - but so are the DOW and Nasdaq. There seems to be a buying spree that's feeding on itself - but it's limited to the Blue Chips. Investors are no longer concerned about the fundamentals - BV, EPS, ROE, etc. Shares are now traded like a commodity instead of an investment in a company. Also from your article, "The biggest threat comes from the Chinese mainland and the yuan. China's exports have been suffering under its fixed exchange rate. Other Asian currencies fell sharply in the midst of the economic crisis last year, leaving China's goods looking relatively expensive. IDEAglobal.com's sources suggest that Beijing has already formed a committee to decide when the yuan should be devalued. If the government decides to move the yuan's fix to the dollar, speculators will assume that the Hong Kong dollar's peg to its US counterpart is also fair game." I have made numerous responds to this statement since the 'crisis' began. I feel it to be uninformed and narrow minded. It looks at less than 20% of China's economy and ignores the impact of a devaluation on the other 80%. If one looks at the total picture, there is little chance of a yuan or $HK devaluation. The 'Committee' is not debating about 'when' the yuan should be devalued, but 'if' the yuan should be devalued. So far it has decided a devaluation would be counter productive. The last 'attack' on the $HK peg proved to be very expensive for those that tried it. I doubt if it will happen again. China is using low interest loans, tax incentives, even subsidies to improve conditions for exporters. I have compared HK/China exporters to others in the region. They are actually doing better than their counterparts in the rest of Asia with less decline in revs and earnings, far fewer bankruptcies. Most of the HK/China companies I have reviewed have less debt and were in a better position to face an economic downturn than their Asian counterparts. This is why I chose HK/China to invest versus other areas as I believe the 'crisis' will benefit well managed, financially strong companies (Shumpeter). Just a layman's opinion, Ron