The Millennium Bug is unlikely to have any impact on Asia's recovery on a six to 12 month view, acco...
The Millennium Bug is unlikely to have any impact on Asia's recovery on a six to 12 month view, according to research by Jardine Fleming. The group expects markets throughout the Asian region will weaken at some point before the year 2000 over Y2K Bug fears, but will rebound by January when worries prove unfounded in the largest markets
Dan Fineman, regional strategist with Jardine Fleming Research, said: "The perceived and actual risks across markets differ greatly enough to justify giving a heavy weight to year 2000 concerns in asset allocation. Due to the difficulty of precisely forecasting the timing of the sell-off, however, we feel more comfortable advising long-term investors to focus on fundamentals rather than year 2000 timing
The group suggests investors should allocate assets to the region as a whole, based on valuations and growth prospects, rather than to take advantage of any Millennium Bug-related market psychology
Jardine Fleming sees the main risk in Asian markets from small and medium-sized businesses, utilities and the public sector. These are less likely to be prepared and could infect the listed companies which are better prepared
Fineman said: "Although the largest markets in Asia appear safe, risks in Indonesia, China and Pakistan are high enough for investors to take note. Power cuts, telecommunication breakdowns and disruptions to public services could inflict real damage to the economy, especially in Pakistan. We recommend underweight or neutral positions at best in these markets
While countries such as Indonesia are ranked high risk by the research group, it is recommending an overweight position in Singapore, believing it to be the safest country in the region, if not the world, in terms of how prepared it is for the year 2000
It also ranks Hong Kong, Taiwan and South Korea as low risk, though at a higher level than Singapore. Within these countries public sectors, utilities and listed companies appear ready for the Millennium but some risk still exists with small and medium-sized stocks in Taiwan and South Korea. Hong Kong's links to China are also causing some concern for Jardine Fleming
Fineman said: "We maintain an overweight recommendations on Taiwan and Hong Kong and underweight on South Korea but the Millennium Bug does not distinguish these markets enough to greatly affect our weightings. These four markets alone boast the added advantage of superior trading liquidity, which alone could boost their relative performance as compared with smaller markets
The year 2000 risk of investing in countries like Thailand, Malaysia, the Philippines, India and Sri Lanka does detract from Jardine Fleming's outlook but not enough to justify downgrading existing recommendations based on fundamentals, the group says
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