As contagion from corporate accounting scandals threatens to spread from the US to Europe, investors are contemplating the irony that Asia may now provide shelter from the storms buffeting Western equity markets.
Five years after the start of an Asian financial crisis that left shareholders wondering if they would ever feel safe in the region again, there are signs money is returning in the wake of the alleged WorldCom fraud and a whiff of similar woes in Europe.
Despite a tumble that sent the broad US market to its lowest level since early 1998, Asian stocks mostly strengthened yesterday, eschewing the usual knee-jerk response of following Wall Street lower.
The Tokyo market rose almost two percent, Singapore was up around 1.3 percent and Hong Kong advanced almost one percent.
"It's surprising really that the market is up after NASDAQ's sharp fall but certainly we are seeing some money flowing from the US and Europe to Asia," said Frederick Tsang, a director of China Everbright Securities in Hong Kong.
"US and European stocks have come down heavily because of fears about corporate accounting practices and earnings numbers. But in Hong Kong a lot of companies are still owned by families who do not have as much incentive as US companies to use accounting practices to boost profits."
Financial analysts say it is ironic that investors are putting their money in a region that many see as having laxer accounting standards than the West. Investors have expected a discount on prices in some of Asia's murkier markets to justify that risk.
But with improvements in Asian corporate governance since the 1997/98 crisis and revelations that US numbers are far from immune to manipulation, the gap between accounting standards is narrowing, said Eddie Lee, strategist at DBS Vickers Securities in Singapore.
"I think that's made it a little more equal," he said.
With that in mind, it's easier to directly compare the valuations of the US and the Asian markets and conclude that Wall Street is overvalued.
Shares in the US S&P 500 index are trading at around 28-29 times forecast earnings, compared with numbers in the low teens in Singapore, Hong Kong and some other Asian markets, said Lee.
Still, in a sign that Asia still has practices that might raise eyebrows in the West, there was talk Japanese public pension funds were buying shares to keep the market firm before Tokyo sold shares in Japan Tobacco.
The S&P 500 fell 2.12 percent to 948.09, its lowest since Jan. 12, 1998. The technology-laced NASDAQ fell to a five-year low for the second straight session, dropping 3.28 percent to 1,357.82. The Dow closed down 1.12 percent at 9,007.75.
TYPHOON: The storm’s path indicates a high possibility of Krathon making landfall in Pingtung County, depending on when the storm turns north, the CWA said Typhoon Krathon is strengthening and is more likely to make landfall in Taiwan, the Central Weather Administration (CWA) said in a forecast released yesterday afternoon. As of 2pm yesterday, the CWA’s updated sea warning for Krathon showed that the storm was about 430km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point. It was moving in west-northwest at 9kph, with maximum sustained winds of 119kph and gusts of up to 155kph, CWA data showed. Krathon is expected to move further west before turning north tomorrow, CWA forecaster Wu Wan-hua (伍婉華) said. The CWA’s latest forecast and other countries’ projections of the storm’s path indicate a higher
SLOW-MOVING STORM: The typhoon has started moving north, but at a very slow pace, adding uncertainty to the extent of its impact on the nation Work and classes have been canceled across the nation today because of Typhoon Krathon, with residents in the south advised to brace for winds that could reach force 17 on the Beaufort scale as the Central Weather Administration (CWA) forecast that the storm would make landfall there. Force 17 wind with speeds of 56.1 to 61.2 meters per second, the highest number on the Beaufort scale, rarely occur and could cause serious damage. Krathon could be the second typhoon to land in southwestern Taiwan, following typhoon Elsie in 1996, CWA records showed. As of 8pm yesterday, the typhoon’s center was 180km
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STILL DANGEROUS: The typhoon was expected to weaken, but it would still maintain its structure, with high winds and heavy rain, the weather agency said One person had died amid heavy winds and rain brought by Typhoon Krathon, while 70 were injured and two people were unaccounted for, the Central Emergency Operation Center said yesterday, while work and classes have been canceled nationwide today for the second day. The Hualien County Fire Department said that a man in his 70s had fallen to his death at about 11am on Tuesday while trimming a tree at his home in Shoufeng Township (壽豐). Meanwhile, the Yunlin County Fire Department received a report of a person falling into the sea at about 1pm on Tuesday, but had to suspend search-and-rescue
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