A little panic would not hurt
Saturday 17 January 1998
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; request a free guide on NISAs from Hargreaves Lansdown
How to protect your assets if the stock markets begin to head south again
Child Maintenance Service to replace Child Support Agency - but is it better?
A student's guide to financial survival: You don't have to drown in debt at university
Bargain Hunter: Kit yourself out in sports gear - at a healthy discount of up to 75%
Energy firms found guilty of bad practice could have licences revoked under Labour government
- 1 Mother fed her daughter tapeworms to make her skinny for beauty pageant
- 2 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 3 Crystal Palace next manager latest: Palace consider Ally McCoist - EXCLUSIVE
- 4 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 5 Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
Bin bag full of cats' heads discovered near Manchester's Curry Mile
iJobs Money & Business
£20000 - £27000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...
£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst - (Active Di...
£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...
£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony