Funds exit Asian economies over Y2K

Funds exit Asian economies over Y2K

HONG KONG (Reuters): Wary investors are moving money out of
Asian countries seen as ill-prepared for the Y2K millennium bug,
an expert at Warburg Dillon Read said on Friday.

Economies perceived to be better prepared, such as Hong Kong
and Singapore, stand most to gain, Sean Debow, head of regional
valuation and accounting research told Reuters in an interview.

"Clearly funds are moving out of Indonesia, India, Thailand
and China on account of Y2K," the millennium bug expert said.

"Money that is Asia-specific, and that is a large portion of
funds that is invested in Asia -- we believe that money has
already started to move to Singapore and Hong Kong."

Apart from a strong driving force to avoid risks, Debow said
the reallocation of particularly U.S.-based funds was also due to
the U.S. Employee Retirement Income Security Act, whose high
standards placed restrictions on large investors holding Asian
stocks with high millennium risk exposure.

The Y2K bug stems from an old programming practice of using
only two digits to denote the year. Older computers could mistake
2000 for 1900 and crash at the start of the new year.

Debow fears Y2K preparations in Taiwan might be disrupted with
the rechanneling of energies to rebuild the island in the
aftermath of a major earthquake in September that killed more
than 2,300 and toppled 52,000 buildings.

Taiwanese involved in logistics, transportation, distribution
and other crucial work, who would otherwise be involved in Y2K
tests and contingency planning, were now too preoccupied with
picking up the pieces after the quake, he said.

"That's going to, in relative terms, hurt Taiwan from their
level of preparation. They are going to have less time for
example to do tests, less time to do contingency planning for Y2K
because they are doing reactive work right now."

Debow also anticipated a general slowdown in shipping in the
region in the weeks straddling the new year as companies avoid
taking chances with ports that might fall victim to the bug.

"Many of the corporates we speak to in Asia have already
indicated to us they will be slowing their shipping and
distribution levels in the last six weeks of 1999."

"Many foreign companies will be stopping shipments into Asia
in that period," Debow said.

Software used to run container terminals were highly Y2K
sensitive and there are plenty of embedded chips in equipment
used to load and unload vessels, he said.