A little panic would not hurt

It is becoming rather difficult to ignore the Far East. The roller- coaster ride in Hong Kong and other markets may seem of little consequence in the Square Mile, but we may yet find the Asian contagion is not confined to the Pacific Rim.

The UK investment community has had a long-standing love affair with the Far East and the arguments have been all too familiar: large populations with aspirations and a strong work ethic; high savings ratios; commercial flare. The trouble is that even though all these factors are present they no longer work. So where did it all go wrong?

Dr Mahathir Mohammed, Malaysia's Prime Minister, recently extolled the virtues of his country. He likened the strong growth achieved to a river in flood. The rocks beneath the surface were concealed by the floodwater. In this case the rocks appear to have been profligate lending, skill shortages and poor management. The speed at which Far East growth hit the buffers was quite alarming. And yet, this time last year, no one was expecting it.

Worries over the likely knock-on effects have been enough to generate a little introspection in the US market. Prices there have retrenched by some 10 per cent, but there is still little sign of panic in Wall Street. Indeed, the reaction in North America and Europe seems more like indifference. But does the end of a period of high growth really matter?

Much depends upon what happens next. That world growth will be affected is undoubted. There is now much less money around the Pacific Rim and demand for manufactured goods must decline. Many countries must be hoping that they can export their way out of trouble. Indeed, given the devaluations, we can expect cheap Asian goods on offer here before long. That does not augur well for some industries, both in Europe and America.

Interestingly, it is the pace of growth in South-east Asia that helped create the problem. In some areas, skill shortages drove up wages and reduced competitiveness.

One of the aspects of these recent developments has been to highlight the over-capacity in many areas of manufacturing production. Improved techniques, better inventory management and the continuing forward march of information technology have brought great changes. Still, if you can't afford to spend the money, the choice is between stockpiling goods and closing whole production lines down. The latter seems inevitable. The worry must be that social unrest could follow.

The message so far for the developed world has been, don't panic but a little bit of panic may now be appropriate. And we all need to keep our fingers crossed that things on the other side of the world do not get too much worse before they get better.

Brian Tora is chairman of the investment strategy committee at Greig Middleton, stockbrokers.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    As in 1942, Germany must show restraint over Greece

    As in 1942, Germany must show restraint over Greece

    Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
    Britain's widening poverty gap should be causing outrage at the start of the election campaign

    The short stroll that should be our walk of shame

    Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
    Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

    Homeless Veterans appeal

    The rise of the working poor: when having a job cannot prevent poverty
    Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

    Prince Charles the saviour of the nation?

    A new book highlights concerns about how political he will be when he eventually becomes king
    How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

    How books can defeat Isis

    Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
    Judith Hackitt: The myths of elf 'n' safety

    Judith Hackitt: The myths of elf 'n' safety

    She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
    The open loathing between Barack Obama and Benjamin Netanyahu just got worse

    The open loathing between Obama and Netanyahu just got worse

    The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
    French chefs get 'le huff' as nation slips down global cuisine rankings

    French chefs get 'le huff' as nation slips down global cuisine rankings

    Fury at British best restaurants survey sees French magazine produce a rival list
    Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

    Young carers to make dance debut

    What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
    Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

    Design Council's 70th anniversary

    Four of the most intriguing prototypes from Ones to Watch
    Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

    Dame Harriet Walter interview

    The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
    Art should not be a slave to the ideas driving it

    Art should not be a slave to the ideas driving it

    Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
    Bill Granger recipes: Our chef's winter salads will make you feel energised through February

    Bill Granger's winter salads

    Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
    England vs Wales: Cool head George Ford ready to put out dragon fire

    George Ford: Cool head ready to put out dragon fire

    No 10’s calmness under pressure will be key for England in Cardiff
    Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

    Michael Calvin's Last Word

    Time for Old Firm to put aside bigotry and forge new links