Uncertain Political Environment Makes Asian Investing Risky

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Includes: EWT, FXI, PGJ, TTF
by: Enzio von Pfeil

Notes from Dr. Enzio von Pfeil's recent appearance on Bloomberg Television Deutschland:

1. What are your current views on China?

• The Economic Time™ is fine, but I am telling our subscribers to not buy.

    - First, the first world's credit recession, two of which we have invested through before, is just beginning. It is going to last a long, long time. Indeed, my newest concern is not ratings or any of that, but what is going on in the banks' back yards, in their off-balance sheets?
    - Secondly, there is an excess supply of paper on offer. Ping An's 120 bn offering is the world's sixth largest, for instance.
    - Finally, the current National People's Congress is full of inflation and "tightening" talk. While we don't believe the reality of "tightening", perceptions of tightening will sway market forces.

2. Taiwan: Do you trust the current rally which started on 23rd January?

• No.
• The reason is that Pres. Chen is hell-bent on his independence referendum on 22nd March.
• For a change, Washington actually agrees with Beijing - probably because U.S. arms companies earn so much off selling weapons to the island. Both do not want Taiwanese independence. Beijing just now has increased its defense spending by 18%, and has made it uncharacteristically clear for an Oriental that they will stand no independence nonsense from Taiwan...

3. Thailand: Are you a buyer?

• No.
• For one thing, The Economic Time™ is not healthy.
• Secondly, Southeast Asia is riddled with dicey politics.
• Finally, Thailand is veering in politically-choppy waters:

    - Who will succeed the revered King?
    - How will Thaksin's power struggle with the King play out?
    - How will Thaksin's power struggle with Prime Minister Samak play out?
    - One has to accept that Samak and Thaksin are extremely shrewd, battle-tested politicians.
• My own guess is that foreigners will find safer havens to invest in, putting downward pressure on the baht.