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The
Week That Was
It
was a week of record highs -- and, for Taiwan, a record low
By
MAUREEN TKACIK
March
14, 2000
Web posted at 4:30 p.m. Hong Kong time, 3:30 a.m. EST
Click here
for current data on world markets from CNNfn
Maureen Tkacik recounts the week that was with Trader X, anonymously
standing in for Jennifer Tai, head of Taiwanese institutional sales
at HSBC, who is on maternity leave.
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All right, I know you're not going to let me back in your lives or
your investment schemes without a little explaining. I was sick, alright?
Sick as a dog. Drenching the sheets sick. Major self-pity sick. So
sick my eyelids hurt. So sick not even the dulcet tones of Maria
Bartiromo could stir any curiosity in what the markets were doing.
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Meanwhile, I
missed:
* The NASDAQ hitting a record high.
* Bush-isms leading the Hong Kong papers: "Read Donny Tsang's Lips--No
new taxes!"
* The Hang Seng hammering home a record high.
* Softbank Finance president Yoshitaka Kitao attacking Pacific Century
CyberWorks and Hikari Tsushin for being "copycats," among other really
mean insults. Towards Richard
Li the put-down was fairly lame: "He just wants to make money."
(As opposed to the rest of the population out there investing in technology
stocks).
* The South China Morning Post running a front-page story studying
the "implications" of Yoshi's yammering. (Uh, let's just say that's
one Internet executive who won't need to be donning "cyber couture"
the next time Richard Li invites Whitney Houston to Hong Kong to celebrate
the millennium--or something like that).
*But Yoshi saved his harshest blows for Hikari CEO Yasumitsu Shigeta
(so much for board of director-ly love). "I strongly urge him to get
off our board."
*Also last week: Hikari stock lost about 60% of its value, although
this was chalked up to some rumors tying Shigeta to the yakuza, Japan's
mafia. Which begs the question: What might valuations in Hong Kong
look like if shareholders punished companies with alleged ties to
organized crime? Answer: probably a bit like valuations in the Philippines.
(The market is at a 16-month low).
* The Nasdaq hit another record.
* Or perhaps like valuations in Singapore, which stayed the same-utterly
underwhelming--while I was under the weather. (Oh, keep on swinging,
guys!).
* The Nasdaq closed at 5,000.
* And while we're on the "why am I not surprised" tip, Japan's GDP
contracted another quarter. The nation is now, officially, back in
recession.
* Hong Kong hailed a raft of new
Internet play stocks, all of them heartily endorsed by Market
Q & A's favorite trader Scott
Blanchard. They are, in no particular order:
1. Harbour Ring
Was: a toy manufacturer
Until: Hutchison bought a controlling stake and announced a
joint venture with ICG, a B2B-heavy Internet incubator
Stay Tuned for: a name change to ICG Asiaworks (not to be confused
with iAsiaworks,
a systems integrator that plans to list on NASDAQ this year).
2. Soundwill Investments
Was: a property developer (of all things!)
Until: it "injected" a stake in a company called Optilink
Stay tuned for: announcements on how they are making heaps
of cash upgrading China's fiber optic telephone lines to handle ADSL
broadband Internet access.
3. Playmate Toys
Was: contrary to the erotic ring to its name, another toy manufacturer
Until: Rumors started flying that eToys was going to form a
joint venture with a listed Hong Kong toy company and list backdoor.
And the joint venture partner turned out not to be: Harbour Ring (see
above)
Stay tuned for: sounds like Internet announcements "R" us..
4. Sunevision
Was: the I.T. department of property developer Sun Hung Kai
Until: property became uncool, day traders fell in love with
the NASDAQ, and the GEM was created. And SHK announced a joint venture
(or two) with: Microsoft, HP, among others
Stay tuned for: thousands of SHK tenants reinventing themselves
as Internet start-ups with the help of "one-stop shop" solutions providing
packages developed by Microsoft, HP, and Sun Hung Kai's tech support
staff.
5. Sunday
Was: Just another bloody day of the week
Until: The name was registered by one of the men who made "Orange"
such a powerful brand in the mobile phone market at Hutchison--Richard
Siemens
Stay tuned for: a GEM listing, a NASDAQ listing
But today, it's all about Taiwan,
people. And I've got two words: limit down. The Taiex shed 6.6% today,
closing at 8,811. This, the same Taiex that was rocketing past 10,000
just a few weeks ago. Why? Because longtime independence advocate
Chen Shui-bian is looking like a shoo-in to win Saturday's presidential
election. I know what you're thinking--but isn't independence the
same as Lee Teng-hui's "two states" spiel? True enough, but the markets
didn't think too much of that spiel, either, remember? As for Chen,
he's a longtime political activist and the candidate Nobel laureate,
Lee Yuantseh, a man known as the "conscience of Taiwan," decided to
throw his support behind him over the weekend. Well, no one ever accused
traders of having consciences, and they hate the idea of a Chen victory
almost as much as China does.
Q: So, does this mean a Chen victory is imminent?
Trader X: I wouldn't say that. He was quite well received at some
DPP rallies over the weekend. But I think it's more the uncertainty
that's spooking people out. The confidence that Lien was going to
win is definitely waning. Of course, there's always the question of
the 25% or so that haven't decided yet. But there have been a lot
of conspiracy theories. The "abandon Lien to oust Soong" idea, for
one--that Lee Teng-hui and key KMT officials would, seeing Lien's
flaws as fatal, would throw support behind Chen to keep Soong from
getting the nomination. Then there's the theory that Lee has always
been a closet DPP-er. He's a very foxy chap, and it's not impossible.
And there's also the notion that perhaps the KMT government portfolio
was actually a seller today, helping to bring the market down to the
level it got, just to spook out voters as to the possible implications
of a Chen victory. But that sounds a little fishy to me, because it's
just so low.
Q: But in any case, this is a temporary downturn?
Trader X: Oh yeah. Fundamentally nothing has changed with Taiwan.
Fundamentally it's still spectacular. But over this week, we're going
to see more and more consolidation, and then after the election, if
Lien wins, we see an immediate upward turn. If Soong wins we expect
one as well. If Chen wins, we'll probably see quite a bit more selling,
but in the medium term, MSCI is the bottom line and the Morgan Stanley
Capital International's re-weighting of the Taiwan index starting
in May will have to mean huge inflows of money into Taiwan over the
next few months. Regardless of anything. And I would also say, if
you're bearish on Taiwan you should be bearish on Asia, full stop.
Because the bottom line is if you believe that China is going to go
to war with Taiwan it is going to drag everyone else in Asia into
the mess.
Q: So are you a buyer right now?
Trader X: Definitely. I'm buying the index stocks for the short
to medium term; Taiwan Semiconductor, United Microelectronics, Formosa
Plastics, Nan Ya Plastics, China Steel is very good at current levels.
I also find Acer very interesting at these levels. I really don't
see much more downside risk for the company and I think its reinvention
of itself into an Internet company and a mobile handset manufacturer
is very compelling.
Q: A lot of computer notebook manufacturers are going into the
manufacture of wireless internet-enabled "third-generation" mobile
phone handsets and personal digital assistants (PDAs) now that the
notebook market isn't growing like it used to. Do you see this as
a feasible goal?
Trader X: Longer term, I think it's an excellent idea.
.
Be
it overvalued tech stocks, high-profile mergers or corruption scandals,
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