As Asia's economic crisis continues unabated, investors and consumers face minefields every which way they turn. Here's a map to help you negotiate treacherous terrain.

By T. J. ZHENG

hat began 12 months ago as a Thai currency crisis set Asia on a downward spiral that has shown no signs of ending. Indeed, in recent weeks, the downdraft has picked up speed. Now, at the crisis' one-year mark, is a good time to step back from the chaos, take a reckoning of damage done and look unflinchingly at the regions' prospects. And that's exactly what this article aims to do.

For millions of households, the pain has been acute. Currencies have devastated middle-class budgets, falling 50% in the Philippines, 61% in Malaysia, and a sickening 377% in Indonesia. Stock markets have demolished family assets, sinking 44% in Hong Kong, 43% in Singapore and 41% in Thailand. As nest eggs have shrunk, so too has the value of the nests themselves. In Bangkok, 3-bedroom flats in good neighborhoods that went for US$170,000 last summer now fetch $99,000 or less. In Hong Kong, 1997's $1 million apartments can be had for $500,000.

The specter of rising unemployment, a particular shock to industrious Asians, now looms large across the region. In riot-torn Indonesia, economists say the jobless rate will rise as high as 13% this year. Even in Hong Kong, Asia's bustling financial center, unemployment has reached 4.2%, the highest since 1984. Dozens of listed companies have gone out of business in the past six months, among them Hong Kong's Peregrine Investment Holdings. Once Asia's largest investment bank, Peregrine shut down in January, laying off a staff of more than 2,000.

Family businesses are hard-pressed, too. Indonesian businessman Iwan Tumewa struggles to keep his family's mattress-making company going in a devastated economy. He must also worry about the safety of his relatives who live amidst the worst political riots in 30 years, with much of the crowds' rage turned against ethnic Chinese like the Tumewas. "We know there is a huge tornado out there and there's not a damn thing I can do about it," he says.

But he does what he can: committing to work for a better future in Indonesia and marshalling his 300 employees to produce more mattresses for new export markets in exchange for much needed U.S. dollars.

People are faring better elsewhere in the region, sometimes much better. In Manila, Anna Celdran, who runs Island Spice, a small chain of garment shops, says her stores are busier than ever. "Consumers here haven't been hit that bad," says Celdran. "We plan to open our sixth store this year." Sales topped $1 million in 1997, and Celdran expects another increase this year.

Overall, however, business will remain slow throughout the region. The economies of Hong Kong and Singapore will grow only marginally in 1998. Some economists suggest both could suffer a contraction. Indonesia's GDP will shrink 12%, Thailand's 6% and Malaysia's 1%. Taiwan may be the only Asian country to post significant growth; Jan Lee, chief economist of HSBC Holdings in Hong Kong, believes Taiwan's economy will grow in excess of 5% in 1998 and 1999.

Looking further ahead, Asia's economies will not recover at the same pace either. Lee says Hong Kong and Singapore won't return to growth rates of 4% to 6% until after 2000. Thailand and the Philippines may have to wait two years longer. Malaysia and Indonesia may not see that sort of growth until 2005.

It will take even longer for any of the ailing Asian economies to regain Tiger status and achieve growth rates of 8% or more. "The challenges facing Asia are formidable," says Michael J. Taylor, chief economist at brokerage house W.I. Carr Indosuez Capital in Hong Kong. "We will not see for another 10 to 12 years the same investment opportunities that we saw in the early 1990s."

The following are reviews of the key pocketbook issues plus advice for individual investors, jobseekers, entrepreneurs and consumers.

STOCK MARKETS

Deep Kapur, Salomon Smith Barney's regional equity strategist in Singapore, recommends that small investors hold onto cash and not invest directly into equities for the next year or two, until the stock and currency markets calm down. And even then, Kapur suggests they restrict themselves to mutual funds. In Asia, Kapur favors funds that invest in the Philippines and Thailand because they are currently undervalued. Also consider funds that invest in Singapore and Taiwan because their companies tend to be well managed, and their currencies are less vulnerable to shocks.

Look at Hong Kong only when the Hang Seng Index dips below 5,500 points. Stay away from Malaysia, which is likely to suffer some shocks as it reforms its economy. And don't even think of Indonesia in this time of acute political uncertainty.

But it would be a major mistake to put all your assets in the Asian basket, particularly now. Peter Hadden, an investment adviser with MBA Financial Services in Hong Kong, says investors should limit their portfolios to 15% in Asia and other developing markets. He would put 35% in funds that invest in U.S. Treasuries or British pounds sterling, and fully 50% in diversified international stock funds with exposure to the U.S. and Europe.

The key advice is not to panic, says Hadden. Investors who've seen their Asian mutual funds drop in value should hold on. "Those who sell are the ones who will lose money," he says. He counsels using dollar cost averaging when you invest--that is, putting the same amount of money in each month over a period of months instead of making a single buy (see "Play the Average" on page 18). This way you end up buying more shares when the market falls. "You must have a long-term approach," Hadden says. "There is obviously a fantastic investment opportunity in Asia over the coming years."

REAL ESTATE

Start by absorbing the sternest of warnings about Asian real estate. W.I. Carr's Taylor tells investors not to buy property at all. "If you want to lose all your money, this is one of the quickest ways to do it."

Tim Bellman, a director at property consultants Jones Lang Wootton in Hong Kong, is less sweeping but nonetheless cautious. In general, he advises local buyers to delay any purchases since most property markets show no sign of having bottomed out. In addition, interest rates may continue to rise as banks limit their exposure to the property market.

In recent months, for instance, mortgage interest rates have risen from 9.25% to more than 12% in Hong Kong; from 20% to more than 60% in Jakarta; and from 14.5% to more than 23% in Thailand.

For long-term investors intent on buying residential property soon, he would consider, in no particular order: Tokyo, as interest rates are extraordinarily low and rental income levels are stable after eight years of declining values; Hong Kong, as prices have fallen by as much as 50% since last July and will likely bottom out by the end of 1998; Singapore, where residential prices never skyrocketed as in Hong Kong and have fallen by only 7% since the crisis began; and Manila, as housing demand is strong and vacancy rates are low.

Bellman cautions prospective buyers to hold off on Bangkok, where a substantial oversupply remains; Jakarta, where political instability is too severe; and Kuala Lumpur, which is oversupplied in both luxury residential and commercial developments.

David Faulkner, a partner at Hong Kong-based property analysts Brooke Hillier Parker, says the residential markets in Hong Kong and Singapore will begin to rebound in 2000. "In five years, most of these markets will have turned or be getting ready to turn," he says.

JOBS

Unemployment will inexorably rise in the coming two to three years across the region as foreign companies limit their Asian exposure and local employers continue to restructure. W.I. Carr's Taylor estimates that up to 50% of the region's investment/finance sector will be gone in the next two to three years.

Asia is over-brokered, says Taylor. "For years, Asian stock markets and companies were run on the assumption that they were going to get heavy capital injections from abroad," he says. "That will no longer be the case."

Richard Hoon, a Singapore-based headhunter, says Asian executives across the board will have to learn to be less demanding about compensation. "Companies that used to say the sky's the limit on salaries are now setting limits," he says. That will take some getting used to for many Asian executives, particularly those in upscale Hong Kong and Singapore. Hoon adds that even Asian companies are beginning to recruit less costly expatriates instead of locals. In Hong Kong, for example, it's not uncommon for a local executive director or managing director to demand a base salary of $26,000 a month, Hoon says, adding that many Australians are willing to take the job for $13,000 a month.

Tim Yemothy, an American public relations executive who was recently laid off in Hong Kong, says he's not picky at all when it comes to salaries. "I just want to get back into a large public relations firm again," he says. "I never even dreamed of wanting a housing package. A straight salary would do me just fine."

CURRENCIES

For Eros Kaw, a Manila businessman, the peso's devaluation has sabotaged his efforts to support his family in the U.S. Kaw spends $10,000 a month on his wife and three autistic children, who are attending special schools in San Mateo, Calif. If the peso falls much further, Kaw says he'll have to consider moving his family back to Manila.

Countless such stories of disrupted plans for families--and failure for businesses--have come out of the currency crisis. Jan Lee of HSBC Holdings sees good and bad news in coming months. Despite steadfast rumors that China may devalue its yuan and that Hong Kong will drop its peg to the U.S. dollar, Lee says he is confident that both currencies will remain stable for the near term. In Hong Kong, asset price deflation is taking the place of devaluation of the Hong Kong dollar, he says. And in China, domestic price deflation is taking the place of real currency depreciation.

Lee sees relative stability in both the Singaporean and Taiwan currencies, as both economies are fundamentally sound. However, he forecasts more downside drift in the Japanese yen, the Thai baht, the South Korean won, the Philippine peso, the Malaysian ringgit and, of course, the highly unstable Indonesian rupiah.

Peter Hadden, the Hong Kong financial adviser, suggests that people with foreign currency needs convert to U.S. dollars as soon as possible and keep the dollars in the bank until they need it. The era of a surging U.S. dollar will likely remain for the short-to-medium term, he says.

SMALL BUSINESSES

One of the reasons why Taiwan is emerging relatively unscathed from the Asian economic crisis is that the island republic relies strongly on small and medium-size exporters who bring in large volumes of U.S. dollars. Other Asian nations are eager to do the same, but it wont be easy. Competition in a global market is sharper than ever, for one thing. For another, financing will be harder to get as many banks tighten their lending to cut their commercial risk exposure. To thrive in the coming years, small Asian businesses need to work smarter than ever before. Some key tactics:

--Export your products for U.S. dollars. Ramblas Sastra, the general manager of home appliance maker PT Indotigatama Parama, says his firm began exploring export markets only six months ago. Its efforts are beginning to pay off. Orders for water pumps and gas stoves are beginning to trickle in from the Middle East and Europe. The infusion in dollars is helping to offset the company's loss in sales, which have plunged some 80% in recent months. If sales pick up enough in the months ahead, Sastra will be able to keep his 1,000 workers busy. He had to lay off that many in the past six months to cope with declining domestic sales.

--Never stop innovating. Richard Hoon, the Singapore headhunter, says he's keeping ahead of the competition with an executive leasing program, the first in the region. Asian companies often cannot afford to hire an executive under a long-term contract. So he offers execs--typically those laid off by multinational corporations--who come with one-year contracts. His clients are happy with the arrangement, he says. Hoon believes that the new business will help keep his overall sales in 1998 at 1997 levels of $3 million. "I'm basically recycling good talent."

--Branch out. Tan Hoe Pin, the deputy managing director of Kuala Lumpur car distributor Tan Chong & Sons, says he's expanding into the insurance business to generate extra revenue. Six months ago his dealership used to sell only cars and auto insurance. Today, with no additional investment on the company's part, his salesmen also sell life insurance. "People who buy cars and car insurance have other needs too," he reasons.

SPENDING

Pradit Sirijindaphan, a Thai businessman, says he's learned to be a lot more frugal since the baht meltdown almost lost him his entire business in January. He and his wife have slashed their entertainment budget and stay home and watch TV more. They have plenty of company across the region, where sagging retail sales have signaled a strong reversal of trend: Asia's big spenders are turning thrifty.

One happy result of all this is that prices are appetizingly low. In Hong Kong, "summer sales" began in May rather than in July. Car dealerships in Kuala Lumpur are offering huge discounts, up to 20% or 30% off certain vehicles. Even immigration officials are getting into the act of offering good deals in Thailand: Elderly foreigners or foreign pensioners can now transform their tourist and transit visas into one-year residence visas to take any therapeutic courses or to tour Thailand, where vacation packages now cost only half of pre-crisis rates. Low prices are likely to remain for the foreseeable future as the region will likely remain in the doldrums for years to come.

For most consumers, however, cash for purchases will remain difficult to come by. Many families are coping with reduced income, and banks are tightening their lending policies. Even if you've suffered no loss of income yet, caution is in order. Families should try to amass six months' salary in cash to provide for emergencies. Tap this stash only if you lose your job and have no other means of income. If you don't have this much saved, face it: There really aren't any bargains you can afford.

REGIONAL REPORT CARD
Most of the region's economies are in a bad way--and will be for some time to come. But the discerning eye can spot investing opportunities through the gloom. Keep the following in mind when making your decisions.

TAIWAN

Strengths: Vibrant democracy, strong export-oriented, hi-tech industrial base.

Weaknesses: Political tensions with China could cause instability.

Opportunities: Keep an eye on the electronics sector, which will benefit from a devalued New Taiwan dollar. Taiwan firms are generally cash-rich and can buy cheap assets across Asia. So keep an eye on M&A activity.

Threats: Many businesses depend heavily on imports, and could be hurt by further currency devaluation.

HONG KONG

Strengths: World-class financial center, clean government, strong legal framework.

Weaknesses: Overpriced real estate. Property companies make up more than 60% of the market capitalization of the Hang Seng Index.

Opportunities: Buy blue-chip stocks when the Hang Seng Index falls close to 5,500 points, which analysts believe is the floor of the market.

Threats: If China devalues its yuan, it will lead to further pressure on the Hong Kong dollar's peg to the greenback. If the peg goes, Hong Kong's economy could go the Southeast Asian way.

SINGAPORE

Strengths: World-class financial center, clean government, strong legal framework. Competitive export-oriented hi-tech industrial base.

Weaknesses: Surrounded by stricken economies--Indonesia, Thailand and Malaysia--with which it has strong economic ties. Cannot remain immune to their continued suffering.

Opportunities: Look for buys in the hi-tech sector, which has suffered from recent volatility but will enjoy a surge from the devalued Singapore dollar in the months ahead.

Threats: Indonesia's social and political instability may lead to a mass exodus of boat people--and Singapore is a day's sailing distance from the shores of Sumatra.

PHILIPPINES

Strengths: Vibrant democracy, emerging English-speaking middle class.

Weaknesses: Inefficient government, corruption-prone civil service.

Opportunities: Analysts say the market is near bottom. But be wary of direct investments in stocks because severe volatility lies ahead. Instead, consider mutual funds with exposure to the Philippines.

Threats: If China devalues the yuan, Philippine exporters will become less competitive, hurting its economy.

THAILAND

Strengths: Working democracy, well-established tourism infrastructure, government committed to IMF-prescribed economic reforms.

Weaknesses: Property and stock market bubbles have burst, leaving financial sector in a mess.

Opportunities: The stock market remains volatile, but it is near bottom. Consider mutual funds with exposure to Thailand.

Threats: If China devalues the yuan, Thai exporters will become less competitive.

SOUTH KOREA

Strengths: Hardworking, well-educated labor force. Strong hi-tech industrial base. Weakening won has made exports more competitive.

Weaknesses: Industrial base copycats Japan's, but is managed less efficiently. Saddled with $57 billion in public and private debt.

Opportunities: None. Severe stock market volatility ahead. Government may face difficulties in implementing financial reforms.

Threats: The weakening yen will hurt business since many manufacturers produce similar products to the Japanese.

MALAYSIA

Strengths: Stable government, relatively well-run civil service.

Weaknesses: Overbuilt in infrastructure and property. Commercial loans to these sectors make up 180% of GDP, the highest in Asia.

Opportunities: Stocks are vulnerable to upward pressure on interest rates. Stay away.

Threats: Further currency devaluation may lead to political instability.

INDONESIA

Strengths: Resource-rich, a large and cheap labor force of 95 million people.

Weaknesses: Corrupt and unstable government saddled with $43 billion in public and private debt. Recent economic turmoil has exacerbated social tensions

Opportunities: None. Unstable government may find it hard to implement financial reforms. Stock market will remain volatile.

Threats: Further political instability may lead to civil war.

HANGING ON IN JAKARTA

Iwan Tumewa has three generations of blood, sweat and tears riding on his shoulders. His grandfather migrated from China to Indonesia. His father built a successful business there making mattresses. Now it is up to him to save that business, PT Airland Hillman Abadi.

The outlook is bleak. While Tumewa's three factories only suffered broken windows in the May rioting, the furniture shops that serve as his distribution system, all ethnic Chinese-owned, have been looted or burned down. Tumewa is aghast: "We are in survival mode."

Tumewa has been exploring export markets, and happily his explorations are beginning to pay off--but only enough to keep some employees busy. He says he may have to lay off some of Airland's 300 workers.

Meanwhile, Tumewa, who is single, is determined to continue to call Indonesia home. With that in mind, he works hard toward ethnic reconciliation even as he struggles to save his business. Recently, he and some ethnic Chinese friends visited a furniture factory in the Central Java city of Solo to advise the ethnic Indonesian owner on management. "We want to try to help small grassroots businesses get going," says Tumewa. "They are the foundation of Indonesia."

PESO-POOR IN MANILA

Manila businessman Eros Kaw, 36, feels he has no choice but to spend $10,000 a month so that his wife, Jocelyn, also 36, and three children, can live in San Mateo, Calif. All three kids--Jack, 5; Zoe, 4; and Rock, 2--are high-functioning autistics who need the special education that isn't available in Asia.

The big outlay wasn't so hard for the Kaws to swing when the peso was 26 to the dollar last summer. But at nearly 40 to the dollar recently, it has become a strain. "I'm grinning and bearing it," says Eros, who commutes from Manila to San Mateo every few months. "The crisis has not affected business in the Philippines so much--just the peso," he says.

Eros' half-a-dozen businesses range from corporate security to construction materials. If the peso sinks deeper, he might have to move his children back to Manila or give up his businesses and move permanently to San Mateo. But if he invested in a U.S. business, it could take too long to pay off. "My father says I just have to be more aggressive, smarter and work harder," he says. "This is the mule theory, and I get to be the mule."

LIVING ON LESS IN BANGKOK

Pradit Sirijindaphan, 35, counts himself lucky. his business was about to go bust in January. He had committed to buy $500,000 worth of imported inventory for his light-fixture distribution firm when the exchange rate was 26 baht to the U.S. dollar. By the time the goods arrived, the baht was 50 to the greenback. He got out of his fix when an aunt unexpectedly invested $150,000 in the firm.

But the scare taught him a lesson. "Before I wasn't so much aware of what I spent," he says. "But I've become really concerned about the value of money." Pradit's wife, Siritara, 33, and their two children--daughter Sirada, 5, and son Athikom, 4--have also learned the new art of frugality. When the Thai economy was good, he and Siritara used to take at least one vacation abroad a year to shopping meccas like Tokyo and Singapore. Now they're taking fewer trips--and only inside Thailand.

But Pradit draws the line at skimping on groceries and health club memberships. "Good health, that's really important," he says, defending the $1,160 annual fee for unlimited use of the Biyarom Sports Club.