But that doesn't mean the issue won't rumble on. Much as with the strong pound last year, the lingering effects of the crisis look set to become one of the big investment themes of 1998. Indeed, Asian turmoil looks set to take the place of factors such as Diana's death, the strength of sterling, and the El Nino weather system as the leading excuse for profit warnings.
Much depends on what happens to Asian markets over the coming year. The various rescue packages on offer may still manage to avert economic collapse, but the crisis could also deepen. Hong Kong abandoning its currency peg to the dollar would be particularly bad news for companies with large investments in the former colony. Either way, economic growth in the Far East is going to be a lot slower than expected 12 months ago. And that has far-reaching implications.
The companies with large direct exposure to Asia are well known. HSBC and Standard Chartered will suffer slower asset growth, and will also have to sharply increase bad loan provisions. Cable & Wireless, through HongKong Telecom, will also see less growth than it had previously expected. Inchcape, the car importer and bottling group, derives almost half of its profits from the region. Not surprisingly, share price falls for these groups have been dramatic.
Other, more dynamic effects are less easy to quantify. A company may only derive a small proportion of its profits from the Far East. But if those profits have been growing very quickly, the slowdown there could have a disproportionate effect on a company's overall profit growth. This effect is particularly pronounced in the case of Rio Tinto, the world's largest metals group, which has seen its share price fall by a quarter in the past six months. Although its sales are spread across the world, most of its growth is in Asia.
Companies in commodity industries are particularly vulnerable, even if they do not have direct exposure to the region, because over-supply in the Far East will prompt a price slump which could quickly spreads around the globe. That puts British Steel, ICI (through its remaining bulk chemical interests) and paper makers such as Rexam on the danger list.
Firms selling large capital goods to Asian countries are clear casualties of the crisis, especially if the projects depend on government cash. Construction orders could also dry up, and existing projects could be shelved. So watch out for groups like GEC, which through its (soon to be demerged) GEC-Alsthom joint venture is involved in large power engineering projects in the region.
Consumer goods are more complicated. Shares in luxury brands such as Gucci have taken a pasting as investors anticipate that the crisis will hit Asia's affluent and fashion-conscious consumers' pockets. Although Britain is short of prestigious fashion brands, other goods will suffer. Music groups EMI and Polygram, which have benefited from booming CD sales in Asia, have already seen a slowdown.
By contrast, Unilever claims that crisis has yet to hit sales in the region. The consumer goods giant has invested heavily to achieve its target of making 50 per cent of its sales from emerging markets early in the next century. However, if Asian consumers do stop buying ice cream bars and washing powder, Unilever will be a big casualty.
The most curious case, perhaps, is that of British manufacturers. With a few exceptions, they have escaped the fallout by virtue of their relatively low exposure to the region. Some, like Siebe, even reckon local currency devaluations will make acquisition targets more affordable.
The danger, however, is that cheaper currencies give Asian exporters a valuable competitive boost in their quest to expand their European markets. This effect may be even more pronounced if demand in the Far East falls away, releasing unsold products into Western markets. Although the strong pound has already done a lot of damage to engineering share prices, a wall of cheap Asian imports flowing into Europe could dash any hopes of recovery.
So although Asia will fade from the headlines over the coming year, that doesn't mean the full effect of the crisis has been felt. Long after the worst of the turmoil is over, UK share prices will still be coming down with Asian flu.Reuse content