Asiaweek.com | What Comes Next?

NOVEMBER 3, 2000 VOL. 26 NO. 43 | SEARCH ASIAWEEK

What Comes Next?
Unless you know where the market is headed — try aromatherapy
By TIM HEALY and ALEXANDRA A. SENO Hong Kong

ALSO:
• Practical Coping Advice

The Rev. Joshua Kimjacobs has been enjoying unusual popularity among his flock at the Onnuri Presbyterian Church in Seoul recently. And he has begun to perceive some themes that tie together the young adults who ask him to lunch. For one thing, they often work in the financial services industry. And they invariably start the meal talking about family, work, the weather — whatever. "Then it comes out," says the 30-year-old Kimjacobs: They wonder if they could enlist God's support in picking hot start-ups, or at the very least get the Creator to lay off the vengeance. "I have to tell them their financial problems are not punishment," he says.

At least not in the Biblical sense. In fact, investors in Asia and throughout the world have been severely disciplined this month by the markets. Selective rallies in the last few days have pulled equities off the floor, but several markets are nevertheless near their low points for the year. Seoul, Taipei, Manila, Bangkok, Jakarta, Singapore, Tokyo and Nasdaq in New York are all either at or near the bottom of their Y2K performance. Especially bad in recent weeks has been market volatility. Uncertainty over renewed violence in the Middle East, which in turn threatens already high oil prices, is feeding market jitters. One U.S. trader recalled the infamous Black Monday stock plunge in 1987, when the market fell 23% in one day: The current situation, he says, "is the maddest market I've seen in 13 years." The carnage has exacted a toll on nearly all investors — and it is being felt by everyone from crisis-hotline counselors to aromatherapists.

Having seen its local bourse drop more than 35% in the last six months, the National Taiwan University Hospital in Taipei is organizing a symposium that will include a special section on "stock market depression." One publicized estimate from the island says there has been a 20% increase in psychiatric patients this year, many of whom suffered severe stock shocks. Dr. Stephanie Kumaria, director of the suicide prevention hotline The Samaritans, says a fifth of the 60 or so calls the group receives each day in Hong Kong are from people despondent about financial reversals. "Many [of our callers] start talking about 'gambling losses,'" says Kumaria. "Then later it turns out they're talking about stock investments gone bad."

Maybe they were right the first time. Markets were obscenely high in the first quarter of the year, valuing companies that sometimes owned little more than an idea higher than companies with real products, assets and a history of profits. And almost anyone who invested in technology back then was, at least in terms of short-term hindsight, an impetuous fool. Today? "It's too late to get out and too early to buy in," says Robert Rountree, managing director of Prudential-Bache Securities in Hong Kong.

That's one point of view. These days, if you can't find the opposite opinion (often from the same person) you just aren't trying. "Although the short-term outlook is unpredictable and could cause more volatility, we believe medium- and long-term investors should view current weakness as a rare buying opportunity," says a Goldman Sachs analyst in the U.S. And in Asia, Guy de Tonquedec of Indocam Asset Management says simply: "It's a good time to spot bargains."

With such conflicting advice on whether it's too early or the perfect time to buy, what's an investor to do? How about this: relax — and take time to moisturize. "I can always tell which clients work in stock markets," says Yvonne Lam, whose beauty salon is only steps from the Hong Kong exchange. "Their skin is drier because they are too busy to drink water and they don't moisturize. They also tend to fall asleep immediately on the massage table because they are so shattered. I'm seeing it more, recently."

Actually stock brokers, who are on the front lines of the equities' battle with themselves, are affected unevenly. Steven Vinik, former head of equity sales for Nomura Securities in Hong Kong, says the markets have been so lousy lately that many traders have simply withdrawn. "One is more likely to find tales of boredom" from brokers, he says, than excitement. Volume on the Hong Kong exchange has been dropping since July. And October is likely to be the slowest month since October 1999.

Depressed markets have had a ripple effect across different parts of Asia's economy. Choong Khuat Hock, regional sales director at Dresdner Kleinwort Benson Securities in Singapore says that investors in the region have lost so much money in equities over the last few months that "personal consumption is trending down all across Asia. That's why property markets in Hong Kong and Singapore are so lackluster." Nasdaq, with its predominance of young technology companies, is typically one of the world's most volatile markets. Choong says that this year Asian bourses like Taiwan, South Korea and Singapore, newly bursting with tech counters, have been nearly as bad.

The effect of volatility on listed companies is harder to gauge. Just facing up to the impact is Watson Wyatt, a global human resources consultancy that went public only recently and began trading on the New York Stock Exchange two weeks ago. John Haley, chief executive of the company, spoke to Asiaweek recently about the early days as a public company and how employees, who are big owners of the company, have responded. "We're advising our [employees] not to get too caught up in the volatility," says Haley, who is on an annual visit of his company's many Asian offices. But it isn't easy. During a recent interview involving Haley and Grahame Stott, Watson Wyatt's Asia-Pacific regional director, Haley was asked how it felt to be the CEO of a public company with a successful IPO — up 31% on its first day to close at $16.38 a share. "I haven't been following the price," he said, at which point Stott chimed in: "I think it's at $17 and 7/16 today." Haley shot him a quick glance, and Stott lowered his eyes: "Or something like that."

But Haley appreciates the situation. He says his 15-year-old daughter is following his company's stock more closely than he is. Everyone, it seems, is following the ups and downs of the market. Haley also knows that the stock price is a critical matter for the employees of many companies, especially dotcoms in Asia that pay a large percentage of compensation in the form of options because they can't afford cash. Some companies in Asia put their stock price on the screen savers of employees to constantly remind them that their primary allegiance is to shareholders — that performance translates into a successful stock price. And if that relationship does not hold? If the stock of a successful company gets hammered along with everyone else? There's always prayer.

With reporting by Assif Shameen/Singapore

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