Some of Asia's stock markets had a few grim days last week, but officials and analysts insist that the region's economies are poised for gains, not collapse, in the year ahead. [Yesterday share prices closed higher in Hong Kong, Tokyo, Singapore, Thailand, and Manila.]
Two broad trends are in Asia's favor. One is that most of the economies in the region have recovered from the financial collapse that began in 1997; in some cases they are beginning to boom again. The other is that Japan, the world's second-largest economy after the US, appears to be emerging from a decade of stagnation.
"We could be at the start of a very long-term recovery in profitability," says Scott Foster, a senior analyst at the Tokyo office of Lehman Brothers.
His assessment reflects a growing optimism that many Japanese companies are on the verge of good times after years of being forced to make much-needed changes in the way they do business.
As Japanese officials frequently observe, the major risk for Asia is the US. Their thinking is that if America's long economic expansion were to end suddenly, the impact in Asia would be severe. It isn't a particularly original worry, but last week's market declines did serve to underscore the point.
One important reason that Hong Kong and Tokyo stock markets sagged was that the US's Nasdaq index, which is laden with technology companies, dropped three days in a row. That decline drove investors to sell Asian technology stocks, creating a minor stampede, at least in Hong Kong, where the major stock index fell nearly 13 percent last Wednesday and Thursday.
But market watchers used the usual worry-alleviating language - "profit-taking" and "correction" - to explain the drop.
Likewise, Japan's Economic Planning Agency Minister Taichi Sakaiya said on Friday that declines in Tokyo and other markets were a normal correction due to profit-taking.
The key number to remember is 69 percent - the amount that Hong Kong's Hang Seng index rose in 1999. It surged upward with special vigor at the end of last year, and many investors may have decided to realize some gains last week.
Mr. Foster, who watches Japanese technology companies, notes that investors in Asia are routinely influenced by what happens in the US. The Nasdaq's gains at the end of last week give him hope for technology stocks in Japan. "They'll probably bounce right back right here too," he says.
Like the Hang Seng, many Asian stock markets had very good years in 1999. The Tokyo Stock Exchange's Nikkei index rose nearly 37 percent; the leading index in South Korea was up nearly 83 percent.
But these gains reflect more the sense of optimism about Asia's economic future than the real state of its economies.
"Buying into the dream of the recovery is easy," says Jesper Koll, chief economist for Merrill Lynch Japan. "Actually delivering on the recovery is going to be more difficult."
But Mr. Koll, who likes to call himself a "paranoid optimist," is upbeat, especially about Japan. He notes that there is increasing criticism of the deregulation and creative destruction now under way in the Japanese economy, but says: "The overall reform drive is so entrenched that nothing is going to be derailed."
(c) Copyright 2000. The Christian Science Publishing Society