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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

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JANUARY 21, 2000 VOL. 26 NO. 2

Riding the Tech Stocks
Focus on electronics and phone companies


Hugh Young is closely watching Asia's love affair with technology shares, but is staying away from Internet stocks. He thinks Hong Kong, India and the Philippines will do well this year, along with telecom and electronics companies
photo: Munshi Ahmed for Asiaweek
What a week it has been for Asian markets. First, a U.S.-inspired end-of-the-year record high. Then a sharp correction, also courtesy of Wall Street and its frothy Nasdaq technology companies. Days later, a euphoric rebound, thanks to a renewed frenzy in American tech shares. What next? Perhaps more of the same, says Hugh Young, managing director of Aberdeen Asset Management in Singapore. The outspoken long-time Asia resident spoke with Asiaweek's Assif Shameen.

How long will Asia's tech craze last?
We are following the Nasdaq herd. It could go on and on. But we already had warning shots across the bow. The problem is that some of this is real and some of it is unreal. Some companies announce a website and its stock price zooms. Others say they might invest in an Internet venture and its stock shoots up. That's the unreal part. But in Asia we have a very real technology sector - the makers of PCs, semiconductors, peripherals, all sorts of electronics components that are used in computers and telecommunications equipment. Asia has some really good listed technology companies, from Samsung Electronics in Korea to TSMC in Taiwan to Venture Manufacturing and Natsteel Electronics in Singapore. You can value these companies, look at their earnings, the demand and supply of their products. Somehow it's unfair to put them in the same basket as some half-baked website. How do you value some of these so-called portals? Having said that, there are some electronics manufacturing companies, the components makers, which are not cheap but have relatively reasonable valuations even in this phase of the rally.

Inside Story
TV mogul Subhash Chandra's plan to bring satellite phone service to India is his biggest show yet

Shampoo Wars
Procter & Gamble beats Unilever in China's stores

Cold Cash
How Thai Union Frozen Food rules the tuna trade

Picking Asia's most promising technology stocks

Clouds over Korean economic reform

Forecast 2000: Face-off
Kennneth Courtis and Richard Rountree: A bull and a bear tell you where to put your money in the coming year

Money & Investing
After a year-long stock rally in India, words of caution from Sanjoy Chowdhury

Money & Investing
Panitch Vikitsreth on Thailand's continuing troubles

Money & Investing
Julian Mayo explains why he's still staying out of Malaysia

What other technology stocks look good?
We like software and solutions companies. In India, there are loads of them, though some are looking very expensive like Infosys Technologies and Satyam Computer Services. I wish I had bought Datacraft Asia in Singapore when it was cheap. It has had a tremendous run. We also like telecommunications companies. Some are actually being touted as Internet plays because they are also Internet service providers or have portals or e-commerce sites. We like Indosat in Indonesia, Singapore Telecom, Cable & Wireless HKT, Korea Telecom. In India, you have VSNL and MTNL. Some of the cellular phone companies in Asia might start to look interesting as wireless data become popular.

Don't you like Internet companies?
There aren't many pure Internet companies in Asia. Sure there are those which have changed their names and added a dotcom. Do we want to buy those? When we invest in a Hong Kong property company that is setting aside money for Internet ventures, I really buy for their property. I put very little value to their Internet business. I am sure there are some ventures that will be outrageously successful, but most will fail. My other concern in the Internet area is oversupply. Too many are doing the same thing. If there were clear leaders in one area of the Internet, whether it is e-commerce or whatever, then there is a strong case for investing. As a fund manager, I feel investing purely on hope and hype isn't going to get the returns for my investors. Investing is really about balancing risks and rewards. But hindsight is an incredible science. In a few years, some people will be asking me why I missed an obvious winner.

What markets will do well this year?
We are still looking for more restructuring and recovery in Asia. It's a slow process - slower in some countries because of the culture or tradition. We still haven't seen the bankruptcies and mergers and acquisitions that we in Asia ought to have had. India offers great value, though not in the tech sector anymore. If liberalization continues, there will great opportunities in government-related companies that will undergo partial privatization. One worries about Thailand because it may not have done enough. There are some good Thai companies like Hana Microelectronics, a components maker. I like Hong Kong - Johnson Electric, which makes micromotors, CDL Hotels, HSBC, which is a great global bank, and Li & Fung, a very well managed trading company.

Not too many fund managers are as bullish on the Philippines as you are.
It's been a dog of a market in the past few months compared with the rest of Asia, but we are still overweight there. The problem in the Philippines has been politics and perceptions of cronyism. It is also a very thin market. A lot of the big companies are linked with or are perceived to be linked with friends of President Estrada. We like a few of the blue chips there - Ayala Land is a favorite of mine. Bank of the Philippine Islands is another. I think there is some more upside in the Philippines, especially if they can do something about their politics.

What is your biggest fear for 2000?
Now that the regulators have relaxed a lot of rules for listing of Internet start-ups and high-tech companies, I believe we are going to see great scams in Asia. All through history, there have been scams. The rules are tightened, only to be relaxed again because some people want to bring back the old entrepreneurial spirit. That gets the scam artists going again.

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