Weaker monies benefit SE Asia in long term<\/p>\n
HONG KONG (Reuter): Depreciation in Southeast Asian currencies
\nwill benefit the region in the long-term, providing investors
\nwith a more accurate return on their investments, fund managers
\nsaid.<\/p>\n
"In the long run, it's a good thing," said Eugene Chung,
\nregional strategist at SBC Warburg.<\/p>\n
"If companies are going to start to be investing their capital
\nmore prudently, then we can expect a higher return on that
\ncapital, we can expect higher earnings and, therefore, better
\ngrowth in the long term."<\/p>\n
Chung said the cost of capital in Southeast Asia had become
\nmispriced, with markets under-estimating the region's risk and
\nover-estimating its growth potential. The current correction will
\nstrengthen Southeast Asia's investment potential as the risk is
\nmore accurately priced in, he said.<\/p>\n
Daniel Hemmant, currency fund manager for Guinness Flight
\nAsia, said the region had become a victim of its own success.<\/p>\n
"As with other emerging markets, Southeast Asia in the past
\nhas been subject to a lot of hype. That's certainly been
\njustified because its economic performance has been exceptional,
\nbut inevitably it gets overblown," he said.<\/p>\n
The Thai baht has shed 25 percent of its value since July 2
\namid concern about the country's ability to service bad loans
\nbuilt up by banks and finance companies, who lent liberally to an
\ninflated property sector.<\/p>\n
Much of the lending was short-term and made in foreign
\ncurrency, exposing the financial sector to yet more pain as the
\nbaht slides.<\/p>\n
Although other Southeast Asian nations fell victim to currency
\nspeculation as the Thai baht sank, analysts said economic
\ncomparisons between Thailand and other nations were largely
\nunfair.<\/p>\n
Economists said the Indonesian currency against the dollar
\nwill not take the wind out of the economy's sails, with inflation
\nseen remaining within government targets.<\/p>\n
"I don't think the impact will be massive," said Daragh Maher,
\nan economist with ING Barings in Singapore.<\/p>\n
"On the corporate level, you may see certain companies feeling
\nthe pinch because of higher import bills, but on the macro level
\nI don't think it will come to that much."<\/p>\n
The rupiah, which started the year at 2,363 to the dollar, had
\nfallen more than 10 percent by Friday's close to about 2,605.<\/p>\n
Many Southeast Asian economies feature current account
\ndeficits, a decline in exports and asset price inflation in their
\nproperty sectors, but few are as exposed as Thailand to foreign
\ndebt, said Bank of America.<\/p>\n
The bank said of Thailand's external debt of US$90.3 billion,
\n$31.5 billion was made up of the Bangkok International Banking
\nFacility.<\/p>\n
This system allowed certain banks in Bangkok to borrow cheap
\nU.S. dollars and lend in baht, which carried much higher
\ninterest. The fixed exchange rate protected the banks from
\ncurrency loss when they switched out.<\/p>\n
All the debt is short-term, and most of it is denominated in
\nU.S. dollars. No other Southeast Asian nation is similarly
\nexposed, although the Philippines, Indonesia and Malaysia have
\nbeen hounded by currency speculation in Thailand's wake.<\/p>\n
The Philippines, whose currency has depreciated to 28.5 to the
\nU.S. dollar compared to 26 before flotation on July 11, is
\nnowhere similar to Thailand, Bank of America said.<\/p>\n
Exports are growing by 22.8 percent in the first five months
\nof this year, while the current account deficit is among the best
\nin Asia at 4.1 percent of gross domestic product.<\/p>\n
Hemmant said any further weakness in the baht is bound to
\nignite further contagion throughout the rest of the region,
\nregardless of economic fundamentals.<\/p>\n
While cheaper currencies and more accurate valuations will
\nimprove the region's competitiveness over the longer-term,
\nSoutheast Asia can expect to suffer from an image problem in the
\nshort-term, said Merrill Lynch chief economist Nicholas Kwan.<\/p>\n
Stocks -- Page 11<\/p>\n
Currency -- Page 12<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/weaker-monies-benefit-se-asia-in-long-term-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }