Bangkok, Seoul could show signs of recovery soon: Economists
Bangkok, Seoul could show signs of recovery soon: Economists
HONG KONG (Dow Jones): The bottom to Asia's economic
contraction is nearest for Thailand and South Korea, according to
Credit Lyonnais Asia Ltd.'s chief economist, Jim Walker. But Hong
Kong has much further to adjust, he said.
"Certainly in some countries, there are signs of a bottom," he
said in a telephone interview with Dow Jones Newswires from
Edinburgh, where he is based.
Walker said the first country to enter Asia's crisis,
Thailand, could also be the first, along with South Korea, to
show signs of recovery.
"Elsewhere, things are much more patchy," he said.
In Hong Kong, for example, there is "a long way to go" in the
adjustment process. He said the inability of Hongkong
Telecommunications Ltd. (HKT) to get an agreement on a 10 percent
across-the-board pay reduction from its employees is proof that
adjustment in the territory is proceeding more slowly than the
economic textbooks would have predicted, given Hong Kong's
currency board system. "Hongkong Telecom has given you an example
of how it is long term, not short term," he said.
Walker said the cover on Credit Lyonnais Asia's coming
quarterly report will feature a cartoon looking down a canyon but
with the sun rising in the background, topped with a caption that
asks "Asia Dawning?"
In Indonesia and Malaysia, things are "much more severe,"
Walker said. Indonesia faces serious social problems, while
Malaysia is "just doing the wrong things altogether," the
economist said.
Among the indicators Walker is studying for signs of an
economic bottoming in Asia is a Credit Lyonnais Securities-
developed model on industrial production. He said it shows "there
has been a burst of industrial production in Thailand and Korea
over the past few months."
Also, he's looking positively at signs of rising unemployment
levels in those countries because companies' performance will
stabilize when costs fall by the magnitude of revenues.
Interest rates are also in focus, said Walker, noting that
when rates edge lower without compromising the exchange rate that
will be a sign that capital flight has abated. "We're seeing
signs of that in Korea and Thailand," he said.
An expected cut in U.S. interest rates could further stabilize
some countries by "mitigating the downturn forces" but wouldn't
correct underlying problems, Walker said.