3 nations face Y2K capital flight

3 nations face Y2K capital flight

SINGAPORE (DPA): Fear of the "millennium bug" will cause
damaging capital flights from China, Indonesia and Thailand,
where investors will worry the computer problem could wipe out
their funds, analysts said in a report Wednesday.

But in places better prepared for the Y2K problem, such as the
region's financial centers Hong Kong and Singapore, investors
will bring money home to avoid unknown risks abroad, to the
benefit of the local economies.

Barclays Capital analysts in their Asian Monthly report
admitted that "assessing Y2K risks is difficult" because
available information is often opaque.

The bank identified China, Indonesia and Thailand as "high" in
disruption risk. South Korea and Malaysia fell in the "medium"
category and Hong Kong joined Singapore as "low".

It is feared the Y2K bug will disrupt computer system
everywhere on New Year's Eve because the machines could misread
the digits 00 of the year 2000 as meaning 1900.

"Even where companies are prepared, it is difficult to check
Y2K compliance in their suppliers and customers," analysts said,
citing Hong Kong as heavily dependent on trade and investment
with China.

"Taiwan's trade is mainly with North America, Europe and
better prepared Asian countries, and so the island is less
vulnerable to disruption outside its borders," it said.

In badly-prepared countries, Barclays Capital said, liquidity
will flood offshore and currencies will weaken over the New Year.

"Investors in less prepared countries will place money
offshore, pressuring their home currencies and domestic asset
prices," said the report.

The first quarter of 2000 will see "Y2K hiccups ironed out,"
it predicted, with foreigners relocating assets to emerging
markets.

Other "special factors" influencing Asian economies would be a
likely devaluation of China's currency in the first quarter of
next year, more political and financial distress in Indonesia and
ongoing financial sector weakness in Thailand.