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Japan: The New Engine for Growth
A Q&A with Andrew G. Stiles, regional dealing director, Jardine Fleming
Web posted at 9 p.m. Hong Kong time, Monday, Aug. 30
The action today seemed to be in Hong Kong, where the Hang Seng index rose 2.28%.
Yes, things weren't terribly exciting anywhere in the region today, but Hong Kong was probably the star, which was a reaction to the second quarter GDP figures released Friday. [GDP growth was clocked at 0.5% for the first quarter, the first positive figure since the fourth quarter of 1997.] Most of the buying was in the futures markets. The two markets have really been Hong Kong, boosted by signs of recovery, and Tokyo, which has been seeing some excitement. Japan still seems to be an area in Asia that people are prioritizing.
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So we weren't just seeing bargain-basement buying after last week's relative stagnation?
Well, there was some of that. But Japan is starting to be seen as the new engine for Asian economic growth. There's a perception that assets will come out of the U.S. and maybe, to a lesser extent, out of Europe and flow into a less overvalued, nice liquid market with a big economy like Japan.
Is Japan's recovery for real?
Well I'd hate to make a prediction on that, but people do think the market can make 20,000 by the end of the year. That's not an unheard-of target. [The Nikkei closed at 17,918 on Monday, up 319 points, or 1.82%.]
But many Japan-watchers are anxious about the yen, which against Japan's will keeps getting stronger against the U.S. dollar and threatens the country's appeal as an exporter and a place to do business.
People do remain concerned about any further strength in the yen, but there is a belief that at about 110 yen to the dollar there will be an intervention to make sure it doesn't go any stronger than that. [The yen is currently at 111.5 to the dollar.]
Why is Taiwan so stable?
Well, Taiwan has had a decent sort of fallback in volume, but in general people still fundamentally quite like the market, though they're concerned about any further rhetoric from China. Economically the market is quite favorable so no one wants to sell, but no one wants to do any big buying when they could be facing problems from China.
Southeast Asia?
Most of the markets are just really holding. Singapore has been the region's best performing market, but the flow of funds just seems to have waned a bit. In Malaysia, the KLSE was very quiet today, pretty much because tomorrow's a holiday in Malaysia and then Wednesday will see the end of the one-year capital controls, meaning foreign investors will have a chance to sell without having to pay an exit tax. But I think that will be quiet. And Jakarta's been quiet with elections, Bank Bali seems to be weighing on everyone a bit. Thailand was reasonably heavy today; it seems there's a lack of interest in Thailand right now--and with the exception of Korea they're the only market that's really seeing a lot of pressure right now.
What's the outlook for Korea?
Well, they had some really good industrial output numbers on Friday. But Daewoo is still overhanging the market, and then today we had Hongkong Bank formally pulling out of the potential to buy Seoul Bank and that was a bit of a negative factor. But in general today was very good, considering Greenspan's speech. Traditionally, Hong Kong in particular has been very tied to the U.S. market but now there's more of a concern for Japan, and there's a feeling that any weakness in the U.S. might not be so disastrous for Asia.
Interview conducted by Maureen Tkacik/Hong Kong
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