Salomon sees months before funds return to Southeast Asia<\/p>\n
HONG KONG (Reuter): Salomon Brothers said yesterday it would
\ntake a few months for funds to begin flowing back into southeast
\nAsian markets following a shakeout across the region, with
\ncurrency instability likely to persist.<\/p>\n
"What we are seeing this year is a withdrawal of funds from
\nthe region," Trevor Rowe, chairman of Salomon Brothers Asia
\nPacific, told Reuters Financial Television.<\/p>\n
"We are starting to see assets at levels now that are becoming
\nattractive but it is probably a few months before we start seeing
\nnet buying taking place in South Asia," he said.<\/p>\n
Rowe said regional currencies were likely to remain fragile
\nfor some time yet.<\/p>\n
"That is going to lead to a weakening in GDP (gross domestic
\nproduct) over the next seven to 12 months as a result of high
\ninterest rates flowing from the currency instability," he said.<\/p>\n
"My own personal view is that I think the Asian countries need
\nto move past this idea of a peg...The idea of a managed float is
\nperhaps something of the past and they ought to be adopting more
\nof a free market type float and allow the currency to find its
\nown level relative to the fundamentals," said Rowe.<\/p>\n
Higher U.S. interest rates would also pose a problem for local
\nmarkets, he said. "Our house view is that we could see the
\nFederal Reserve move to a policy of tightening by the end of the
\nyear, something like 50 basis points," said Rowe.<\/p>\n
"This clearly is going to make money more expensive in this
\npart of the world in terms of borrowings."<\/p>\n
While the markets were waiting to see how Southeast Asian
\nnations, clearly unprepared for the crisis, would deal with the
\nsituation, investors were shifting their focus to North Asia.<\/p>\n
Rowe said U.S. funds were being repatriated to the United
\nStates and some money was flowing into the Taiwan and Korean
\nmarkets.<\/p>\n
He said Thailand and Malaysia remained vulnerable but
\nIndonesia and the Philippines had better fundamentals. "I think
\nthere should be opportunities in all these countries. It is just
\na matter of when they bottom out," said Rowe.<\/p>\n
Markets across the region took a beating yesterday. In
\nMalaysia, the benchmark composite index tumbled 32.50 points, or
\n3.77 percent, to 830.58 while Jakarta's composite index slid
\n15.085, or 2.62 percent, to 559.931.<\/p>\n
In the Philippines, the composite index fell 67.48 points, or
\n3.05 percent, to 2,145.29 while Hong Kong's Hang Seng Index ended
\nthe morning session down 411.74 points, or 2.78 percent, at
\n14,393.70.<\/p>",
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