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Another year of 'happy investors'
forecast
By Gary LaMoshi
DENPASAR, Bali - Stories about bird flu were
flying, but there was plenty of optimism in the air at
the Ninth Asia Securities Forum in Bali last week. After
a year when Asian stocks partied like it was 1999 - or
before the 1997 crash - securities brokers and dealers
didn't offer any reasons for the music to stop.
If you listened to the assembled market mavens
from nine economies, the H5N1 virus represents a buying
opportunity in a year when things are expected to get
even better. Bird flu may simply be one of those bits of
cheek to expect in this Chinese Year of the Monkey.
Don't let the tricks make you overlook the treats,
brokers cautioned.
Continued economic recovery
in the United States, the growing booms in China and
Thailand, rebounds in South Korea and Malaysia, and
flickers of hope for Japan all point to stock markets
rising further.
Election fever - catch
it!
Overseas investors may think otherwise, but
the national elections in the Philippines, Indonesia,
Taiwan and Malaysia shouldn't fuel fear. Instead, they
are expected to fuel consumption as campaigns push money
into the economy through advertising, rallies and other
accessories of democracy.
Don't be alarmed, the
brokers advised, even though the Philippine election
could wind up in the courts due to a row over the
citizenship of leading opposition candidate Fernando Poe
Jr. Another term for President Gloria Macapagal-Arroyo
would, on the other hand, continue the policies that
have pummeled the peso to all-time lows and kept the
Philippine economy the sick man of Asia.
Indonesia could give a new term to its unelected
presidential daughter Megawati Sukarnoputri. While the
archipelago has staged a stock-market recovery and the
rupiah has rebounded (see Rupiah defies Indonesia's gravity,
April 24, 2003), the rising currency hits two key
groups, exporters and foreign investors, needed to fuel
greater growth. Participants in the forum's special
one-day focus on Indonesia's economy - including the
ministers of finance and privatization - acknowledged
that unemployment remains near 40 percent, and that
projected 4 percent economic growth in 2004 won't dent
that number.
The economy faces the new challenge
of repaying debt without concessions now that Indonesia
has left its International Monetary Fund (IMF) program.
The loss of the IMF prod may further slow reforms
necessary to end KKN (Indonesian slang for corruption,
collusion and nepotism) and attract desperately needed
international capital. Potential presidential candidates
include a convicted corruptor, a Suharto-era general
under United Nations indictment for human-rights crimes
in East Timor and one of the Smiling General's
daughters, but not a single legitimate reform figure.
Strait talk
Taiwan's election,
featuring the referendum on mainland missiles pointed at
the island, promises to heighten cross-Strait tensions.
Western governments have lined up against Taiwan's
exercise of democracy, in line with the wishes of their
far larger Chinese trading partner (see Strait talk on foreign Investment in
China, December 17, 2003). In Bali, though,
securities officials from both sides of the Strait were
united in their upbeat economic assessments.
China once again is expected to lead the world
in growth, sucking in raw materials from it neighbors to
help their economies. Chinese companies have also begun
to make some investments in the region, particularly
Thailand, swooping in on idle manufacturing plants put
out of business by Chinese exports. Whether that formula
will work - China's real competitive advantage is cheap
labor, not innovative technologies or management
techniques - remains to be seen.
At home,
China's boom may be pumping up a bubble. The banking
system remains rotten to the core despite massive
injections of government money. Stellar growth numbers
are barely enough to keep people employed as workers
spill from widening cracks in the iron rice bowl. Those
stylishly dressed mobile-phone chatters with their Prada
bags strolling the Bundt in Shanghai are real, but so
are tens of millions of displaced workers.
Few
of them are participating in the region's rising stock
markets. In fact, surprisingly few people anywhere in
Asia invest in local stock markets. (That ought to tell
overseas fund managers something.) Although China claims
60 million investors, the real number is closer to
100,000. With the exception of Taiwan, retail investors
constitute minuscule fractions of the Asian population.
As you can imagine, Asia's securities brokers
and dealers aim to change that. They hope that lower
yields on the bank savings will lead to greater interest
in equity markets. They hope to entice investors with
new products, such as expanded mutual funds and
equity-linked savings schemes.
Wanted: 'Happy
investors'
Philippines Association of Securities
Brokers and Dealers treasurer Leonardo Arguelles
reminded his colleagues of the bottom line: "Happy
investors will be the best salespersons for the equities
markets." Asked to provide guidance for creating happy
investors, Arguelles cited Philippine Long Distance
Telephone, the Manila- and New York-listed national
telecom leader; PLDT shares rose from P230 (US$4.12) at
the start of 2003 to P1,040 recently.
There's
little question that investors who pocket profits from
markets are happier than those who lose money. But
brokers ought to understand better than anyone that for
every investor who bought PLDT at P230, there's one who
sold at that price, as well as a buyer for those shares
at P1,040. (They're currently trading back in the triple
digits.) Not every investor will always win, or win as
big as he might have, even in the most buoyant markets.
Market professionals can't change that.
People
in the securities business can, though, do far more to
ensure that investors get a fair deal. Beyond basic
honesty - and brokerage scams occasionally occur
everywhere - the Bali delegates' reports on their
markets paid lip service to such platitudes as good
corporate governance and regulatory reform, but in
practice little has changed (see Parmalat: It can, has and will happen in
Asia, January 6).
None of the brokers
discussed, or even seemed aware of, key Asian structural
problems, notably trading in stock markets where
majority or controlling shareholders, especially state
agencies or politically connected elites, call the tune.
These are issues that should keep domestic and foreign
investors wary of Asian markets.
To create happy
investors, brokers, regulators and issuers need to pay
less attention to the ups and downs of equity markets
and much more attention to Asia's depressed stock of
equity - in the original sense of the word - in the
market.
(Copyright 2004 Asia Times Online Co,
Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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