The onset of the Year of the wily Rabbit has seen no similar perkiness of the stock market. In fact most Asian markets are down, or pretty slow, and currencies are stable. That is not to say of course that there have been marked improvement over the last three to four months. Stock markets have seen major gains, as have currencies, whether this is associated by working hand in hand with the IMF (Korea and Thailand), smart strategic globalisation (Singapore) or even telling the West to get lost (Malaysia). Whatever the strategy, there has been major improvement, which would suggest that it is really just a major correction to the under-valued markets of 6 to 12 months ago rather than due to any smart strategy.

But resistance has clearly set in at existing peaks during this New Year.

According to V. Jayanth of the Hindu Daily..

Six weeks into 1999, market analysts said, only Jakarta, Manila and Tokyo exchanges had made marginal gains this year. Taipei and Hong Kong were the slowest to recover; with the Taipei weighted stock index losing over 900 points in the first five weeks of the year. The Hang Seng in Hong Kong has shed more than 600 points in the same period.

What is very clear is that the Malaysian Ringgit is under-valued. While other Asian currencies have made gains to the US dollar over a 6 month period, the Ringgit necessarily has stayed the same, being pegged to the US greenback. When the Ringgit is floated, all other things being equal, expect a quick rise. Of course, it makes sense given Malaysian economic policies at present which restrict outflow of the currency. Very few people would want to convert the Ringgit into other currencies at present, even given the relaxing of some of the currency restrictions of a month or so back.

The common wisdom that the Japanese are willing to let the Yen fall against the US dollar has also affected Asian currencies, as well as continued speculation on the date of the devaluation of the Remimbi. It is inevitable some time in the next 18 months, though the timing can't be speculated.

Asian economies in general, apart from Indonesia where a smooth election will have a major impact, have more or less found their right value. Further recovery will not come by magic, but by serious evidence that the financial institutions are reforming, and that management, both in government and private business is changing to become more effective, rather than relying on favours and anticipated growth. The time when Asian business could attract investment on the basis of future growth is now long past.. a relic of the boom years.

We have had a good recovery, if only because the panic now has disappeared. The lid is on future recovery until we do the really hard work.