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Web-only Exclusives
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?

Asiaweek Time Asia Now Asiaweek story

DECEMBER 3, 1999 VOL. 25 NO. 48

'Tis a Season of Great Joy
Can Hong Kong's new Growth Enterprise Market sustain investor interest?


photo
Mark Konyn is not entirely bullish on Asia -- he thinks the Philippines could be better. But he's pretty positive elsewhere, especially on the impact of WTO membership for China on the region
photo: Chris Stowers for Asiaweek
 
The final weeks of the year are normally a quiet time for stock markets, when fund managers can reflect on the past and plan strategies for the future. It seems different this time. Asian economic recoveries are shifting into top gear, the appearance (or not) of the Y2K bug is close at hand and news of corporate restructuring is coming fast and furious. Meanwhile, New York is disappointed if the Nasdaq market does not set a record, and the U.S. economy seems to exhibit the perfect blend of growth and deflationary tendencies. Count Mark Konyn among a stampede of fund managers in Asia who are ending the year, century and millennium in a bullish mood. The director of Dresdner RCM Global Investors in Hong Kong spoke recently to Asiaweek's Assif Shameen about why he is so optimistic:

The Hong Kong market has done well in the aftermath of the city's deal with Disney and the successful World Trade Organization (WTO) talks. Is the surge justified?
WTO helps to reduce the risk premium that foreign investors place on China. It helps to waylay fears about currency and profit remuneration, interference in business and investment, and ad hoc tariffs. And it paves the way for more foreign direct investment in China, which should have a positive effect on Hong Kong because it is still the mainland's main business and investment gateway. WTO is also positive regionally because of its impact on overall trade - although China is not a major trading partner for most Asian countries. China records just 3% of global trade, but membership will hopefully [increase that]. For companies that operate ports in Hong Kong and China like Hutchison Whampoa, WTO is a big positive.

    ALSO IN ASIAWEEK
Maverick
Hong Kong's Jimmy Lai takes on the Establishment

Debut
Will Hong Kong's tech-heavy stock market fly?

Trading
The new exchange in Japan has plenty of rivals

Chips
Singapore's fast-rising silicon-wafer maker

Reform
Thailand finally passes a new foreign-investment law

Investing
Asia's markets defy the usualy year-end dullness

Interview
South Korea's reform czar Lee Hun Jai looks back -- and ahead

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What impact will Hong Kong's new Growth Enterprise Market (GEM) have? Skeptics say it is just tapping into hype?
Technology is the high-growth area that investors want to have exposure to. It's the theme of the moment. At this stage, a lot of the regional Internet-type companies we are hearing and reading about in Asia are just concepts. Hong Kong is still catching up with other Asian markets. But if there is commitment, there will be a benefit at the investor level. Fund managers are eyeing GEM with curiosity. On one hand, GEM allows companies to list with lax requirements, which is a negative, but on the other hand you are allowing companies in the high-growth sector to list, which can be hugely positive.

You were a big fan of South Korea early this year. Is the market getting ahead of itself?
South Korea has had an incredible run. The economy is still strong - the latest numbers for annualized GDP growth are over 12%. The Korean rebound has surprised many investors. Inventory levels have been ground down, industrial production is soaring, consumer spending is surging, and exports are doing very well. The key concern is whether there will be continued commitment to put in place corporate reforms to avoid the pitfalls of previous years. Historically, the current account suffered as the economy grew because the nation sucked in huge amounts of imports. That is not the case this time. Because the market has reached such high levels we are slightly more cautious, but South Korea still has some upside in coming months.

Indian stocks have done very well - up nearly 50% this year. What is next?
We are very bullish on India. Foreign investors have been net buyers in the last several months. India is now giving tax incentives to encourage retail investors to invest in mutual funds. The Indian market is trading 15 times next year's earnings. Earnings growth is likely to be 15% in the current fiscal year and 22% next year. We are looking at some of the cyclical stocks at the moment. Cement demand is likely to increase at an annualized rate of 22% in the first quarter of next year. Diesel consumption this year was up over 10%. Some of the software companies like Infosys and Satyam Computer have done very well.

What are your favorite markets in Southeast Asia and your least favorite?
[I like] Malaysia. After the election, political risks will be out of the picture. Malaysia is getting back into the MSCI indices. The economy is rebounding. The government wants the market to do well to create a wealth effect. Singapore handled macroeconomic issues very well - better than most Asian nations. Earnings growth is strong, but I think the market has reached a level where you need to be a little more cautious going forward. The Philippines is probably our least favorite. It has been really lackluster. Filipino companies don't stack up on a regional level. Growth is not coming at the corporate level in the same way it is in other Asian markets. Elsewhere, Indonesia is recovering but political concerns remain.

Is Taiwan going to outperform other Asian markets next year?
Taiwan could be a huge surprise. Liquidity is abundant, core businesses are very well-positioned and the electronics sector is doing very well. But there are still weaknesses in banking, and because banks are such a big part of the composite index, you may not see great opportunities when you just look at the index. The upside in Taiwan next year will be outside the financial sector. But with presidential elections next year, the issue of China relations will once again come into play.

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