Salomon sees months before funds return to Southeast Asia

Salomon sees months before funds return to Southeast Asia

HONG KONG (Reuter): Salomon Brothers said yesterday it would
take a few months for funds to begin flowing back into southeast
Asian markets following a shakeout across the region, with
currency instability likely to persist.

"What we are seeing this year is a withdrawal of funds from
the region," Trevor Rowe, chairman of Salomon Brothers Asia
Pacific, told Reuters Financial Television.

"We are starting to see assets at levels now that are becoming
attractive but it is probably a few months before we start seeing
net buying taking place in South Asia," he said.

Rowe said regional currencies were likely to remain fragile
for some time yet.

"That is going to lead to a weakening in GDP (gross domestic
product) over the next seven to 12 months as a result of high
interest rates flowing from the currency instability," he said.

"My own personal view is that I think the Asian countries need
to move past this idea of a peg...The idea of a managed float is
perhaps something of the past and they ought to be adopting more
of a free market type float and allow the currency to find its
own level relative to the fundamentals," said Rowe.

Higher U.S. interest rates would also pose a problem for local
markets, he said. "Our house view is that we could see the
Federal Reserve move to a policy of tightening by the end of the
year, something like 50 basis points," said Rowe.

"This clearly is going to make money more expensive in this
part of the world in terms of borrowings."

While the markets were waiting to see how Southeast Asian
nations, clearly unprepared for the crisis, would deal with the
situation, investors were shifting their focus to North Asia.

Rowe said U.S. funds were being repatriated to the United
States and some money was flowing into the Taiwan and Korean
markets.

He said Thailand and Malaysia remained vulnerable but
Indonesia and the Philippines had better fundamentals. "I think
there should be opportunities in all these countries. It is just
a matter of when they bottom out," said Rowe.

Markets across the region took a beating yesterday. In
Malaysia, the benchmark composite index tumbled 32.50 points, or
3.77 percent, to 830.58 while Jakarta's composite index slid
15.085, or 2.62 percent, to 559.931.

In the Philippines, the composite index fell 67.48 points, or
3.05 percent, to 2,145.29 while Hong Kong's Hang Seng Index ended
the morning session down 411.74 points, or 2.78 percent, at
14,393.70.