Everybody still feels that the trend is up–people never feel negative at the top of a market. I think we have to now look at which parts of Asia will have a slowdown and which areas will have an acceleration. Asia is going to develop so quickly that it is not crystal clear which will be the next centers of prosperity. I can tell you that today they are Tokyo, Osaka, Hong Kong and to some extent Bangkok. But in 10 years maybe you will have new cities that have grown much more rapidly like Shanghai and Saigon.
North Korean loans. We have no money in Asian stocks. We are very, very optimistic about North Asia. We feel that North Korea has no more friends and wants to open up the country. I think North Korea is not a nuclear threat at all: this is more a case of trying to blackmail the West into obtaining favorable terms. Long term, I feel that its debt will appreciate considerably. We paid 12 to 14 cents to the dollar around three months ago.
You shouldn’t be in a hurry to try to be the first one in. At this stage there are still lots of uncertainties in China concerning property rights. The securities market is not terribly cheap. The bulk of the China funds so far have been invested in the Hong Kong market. This is precisely one market I would avoid, because I believe that the opening of China may actually take growth away from Hong Kong in the long run.
If you look at Hong Kong in 10 or 20 years’ time, it will be just one Chinese city and will not have the special privileges that it enjoys at the moment. Taxes (now 15 percent) will be as high as they are in China (up to 40 percent). And in five to 10 years’ time, most of the traffic in and out of China will no longer go through Hong Kong. It will go directly into Shanghai, Beijing, and so forth. The years ‘93-‘94 may be the peak of Hong Kong’s prosperity.
I would advise individual investors to wait until things look as bad as they did after Tiananmen Square in 1989. Where were the individual investors then? The Hang Seng Index was at 2,000–recently it was at 12,000. I’m quite interested in Russia because the headlines in the newspapers are so negative. I’m not saying that every place that’s in the pits will recover. But I’m saving avoid the most popular investment themes.
Long-term investments still have to be bought at the right price. I’m sure that Japan is a very good long-term investment. But if you bought it when the Nikkei was at 39,000, you may have to wait 10 or 20 years before you see 39,000 again. if someone is truly interested in investing in Asia, I would look at some Japanese companies that will participate in Asia’s growth. They have the technology that the Asian countries require. I would also say that if someone is wildly bullish about the economic rise of [China], it’s much easier to buy commodities than to invest in China. For instance, buy oil shares. The Chinese will not be self-sufficient in oil. They will be huge oil consumers.
If you put a gun to my head and said you must buy something that is China-related, I would rather go and buy a house in Shanghai than a house in Hong Kong. I think that Shanghai will be much more important in 10 years. I would imagine that it already is, except for the financial market.
For a small country like Taiwan to grow exclusively through exports was possible. But for 1.1 billion people you have to get domestic growth going. You have to increase the purchasing power. Therefore, I think the infrastructure industries and the domestic-oriented industries are more attractive than the exporting industries. It is unlikely that the Chinese will lift the living standards of the Swiss. But if only 100 million or 200 million people become a kind of middle class then they will become an important economic power.
