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Monetary Policy Impact on Asian Economic and Capital markets outlook, opportunities and challenges: 

Monetary Policy Impact on Asian Economic and Capital markets outlook, opportunities and challenges Asian Economy and Capital Market Asset Prices, Bubble Simulation, QFII/QDII Strategic Risk Management By Dr Warren Huang(黃華南博士), Pioneer OSA website: www.oswh.com osawhh@citiz.net Presented to Asian Finance, Capital Market Conference, Singapore, Nov. 5, 2003, by Euro-events

Monetary policy impact on China Economy and capital market outlook: 

Monetary policy impact on China Economy and capital market outlook China money supply growth soared to 22 % due to excessive foreign capital inflow into the coastal area and booming export, with auto, housing load demand exceeds 30 %, leading to China Peoples Bank raised bank reserve ratio to 7 %, cut 150 billion auto, housing loan. Reduce money supply growth to 17 %, GDP slowdown to 7.5 % 2004 Housing bubbles in Yantze, Pearl River , Bohai delta, with housing price up 60-200 % auto demand up 60 % benefited by heavy foreign capital inflow , easy credit, facing bank credit tightening Steel, construction material and telecommunication will facing credit tightening, however supported by global economic recovery IT upstream/downstream benefited by global economic recovery but facing price war due to over-capacity Oil upstream/downstream facing high oil price ( 24-34), facing soaring raw material costs (cotton and fibers) China listed stocks earning suffered by credit tightening, however supported by global recovery and DFI, Shanghai A 1250- 1650 Shenzhen A; 2850-3550

Monetary policy impact on S. Korean economic and capital market challenges, opportunities: 

Monetary policy impact on S. Korean economic and capital market challenges, opportunities Korea overheated housing, auto industry with excessive credit demand and 13 % default rate, will push Korean central bank credit tightening, despite GDP slowdown to 3 % next year Housing bubbles with housing price up 60 % auto demand up 40 % benefited by low interest rate facing bank credit tightening Steel, construction material will facing credit tightening, however supported by global economic recovery IT upstream/downstream benefited by global economic recovery but facing price war due to over-capacity Oil upstream/downstream facing high oil price ( 24-34), soaring raw material costs Korean listed stocks earning suffered by credit tightening, however supported by global recovery and Seoul : 650-850

Monetary policy impact on Japaneconomy and capital market opportunities, challenges: 

Monetary policy impact on Japan economy and capital market opportunities, challenges Japan money supply growth creeping up from 1 % to 2 % due to export rebound , improved business demand, stock prices rebound 50 % from Nikkei 7500 to 11200, finally getting out of recession and deflation, with GDP up 3.9 % in the second quarter. High unemployment at 5.2 % will drag Japan consumer spending and GDP around 2.5 %, As Japan getting out of deflation ( benefited by soaring import oil, commodities prices, bond yield soared to 1. 5 %, , Soaring Japan trade surplus and interest rate leading Yen rebound to 106-112. However, strong yen will hurt Japan export, corporate profit, stock prices,GDP and finally cutting into trade surplus, weakening Yen strength and stock price plunge, Nikkei is overheated, facing correction: 10,000- 12000 High jobless rate drag housing, auto demand prices IT upstream/downstream benefited by global economic recovery but facing price war due to global over-capacity and competition. Oil upstream/downstream facing high oil price ( 24-30), soaring raw material costs, cutting into profit margin, stock prices. but supported by improved demand and prices

Monetary Policy impact on Hong Kong Economy, Capital market opportunities, challenges: 

Monetary Policy impact on Hong Kong Economy, Capital market opportunities, challenges Hong Kong money supply growth creeping up from 0 % to 2.5 % due to export rebound , pouring Chinese tourist, getting out of SARS and China free trade with increased DFI, improved business demand, stock prices rebound 50 % from 8500 to 12500, still facing deflation, even return to growth in the second half , with GDP up 2% in the second half High unemployment at 8.2 % will drag Hong Kong consumer spending and loan demand, GDP around 2.5 %, High jobless rate drag housing, auto and manufacturing demand prices IT upstream/downstream benefited by global economic recovery but facing price war due to global over-capacity and severe competition. Oil upstream/downstream facing high oil price ( 24-30), soaring raw material costs but supported by improved demand and prices Banking stock prices up more than 50 % are overheated, properties demand and prices firm up, but no strong rebound in sight high tech stocks follow global market slowly recover Henseng index 10,000-13,500, red chips,H shares follow China stock consilidation

Monetary Policy impact on Singapore Economy, Capital market opportunities, challenges: 

Monetary Policy impact on Singapore Economy, Capital market opportunities, challenges Singapore money supply growth creeping up from 0 % to 3.5 % due to export rebound ,and drug industry pick up, getting out of SARS , improved business demand, stock prices rebound 50 % from 1200 to 1800, still facing deflation, even return to growth in the second half , with GDP up 2% in the second half High unemployment at 4.2 % will drag Singapore consumer spending and loan demand, GDP around 2.5 %, High jobless rate drag housing, auto and manufacturing demand, prices IT upstream/downstream benefited by global economic recovery but facing price war due to global over-capacity and competition. Oil upstream/downstream facing high oil price ( 24-34), soaring raw material costs but supported by improved demand and prices Banking stock prices up more than 30 % are overheated, properties demand and prices still weak, no strong rebound in sight high tech stocks follow global market slowly recover Singapore ST index 1650- 2000,

Inflation interest rate bond yield simulation: 

Inflation interest rate bond yield simulation Despite consumer inflation is relatively flat, commodity and housing prices soared reaching bubble burst Due to low interest rate and easy credit, falling dollar. Inflation rates Consumer spending currency Oil, commodity,asset prices Money supply growth Interest rates, bond yield currency

Monetary Policy impact on Taiwan Economy, Capital market opportunities, challenges: 

Monetary Policy impact on Taiwan Economy, Capital market opportunities, challenges Taiwan money supply growth up from 2.5 % to 4.5 % due to export rebound , getting out of SARS threat , improved business demand, stock prices rebound 50 % from 3500 to 6000, still facing mild deflation, even return to growth in the second half , with GDP up 2 % in the second half High unemployment at 5.2 % will drag Taiwan consumer spending and loan demand, GDP around 2.5 %, High jobless rate drag housing, auto and manufacturing demand prices IT upstream/downstream benefited by global economic recovery, export but facing price war due to global over-capacity and competition. Oil upstream/downstream facing high oil price ( 24-34), soaring raw material costs but supported by improved demand and prices Banking stock prices up more than 50 % are overheated, properties demand and prices firm up, but no strong rebound in sight Taiwan index 5,200-6,500, OTC 95- 135, China concept stocks follow China stock consolidation NT exchange rate 33.1-34.1

Monetary policy impact on Japan economy, capital market opportunities, challenges: 

Monetary policy impact on Japan economy, capital market opportunities, challenges Japan money supply growth creeping up from 1 % to 2 % due to export rebound , improved business demand, stock prices rebound 50 % from Nikkei 7500 to 11200, finally getting out of recession and deflation, with GDP up 3.9 % in the second quarter. High unemployment at 5.2 % will drag Japan consumer spending and GDP around 2.5 %, As Japan getting out of deflation ( benefited by soaring import oil, commodities prices, bond yield soared to 1. 5 %, , Soaring Jpan trade surplus and interest rate leading Yen rebound to 106-112. However, strong yen will hurt Japan export, corporate profit, stock prices, GDP and finally cutting into trade surplus, weakening Yen strength and stock price plunge, Nikkei is overheated, facing correction: 10,000- 12000 High jobless rate drag housing, auto demand prices IT upstream/downstream benefited by global economic recovery but facing price war due to global over-capacity and competition. Oil upstream/downstream facing high oil price ( 24-30), soaring raw material costs and strong Yen, but supported by improved demand and prices

Asian currency/RMB future, derivatives pricesmarket forces mechanism simulation: 

Asian currency/RMB future, derivatives prices market forces mechanism simulation Rising US interest rates, improved US economic recovery supporting US dollar, however hurting by soaring import, trade, current account deficit, Stabilize RMB By cutting trade surplus with US your country trade surplus/deficit Daily US dollar Asian and RMB exchange rates and futures prices Interest rate spread between US and yours US trade deficit Integrating into Black-Schole for derivatives, risk hedging

Asian housing prices, wealth mechanism simulation: 

Asian housing prices, wealth mechanism simulation Some Asian countries benefited by excess Credit, low rates, capital inflow lead to housing wealth bubble, while drag by high unemployment Money supply growth Mortgage interest rate Housing prices bubble, wealth simulation Stock market wealth Stock index changes

Two master hands controlling Asian stock prices and volume simulation: 

Two master hands controlling Asian stock prices and volume simulation Co-integrating US economy,stock prices into Asian stock prices and domestic economy Money supply growth Consumer spending Interest rate/inflation rate Shanghai/Shenzhen, Hong Kong Henseng, Nikkei, Taiwan, Singapore ST, Seoul stock indices, futures, investor sentiment and trading volume US investor sentiment NY Dow Jones/Nasdaq stock index Integrating into Black-Schole for derivatives prices hedging

Information industry post bubble burst recovery simulation: 

Information industry post bubble burst recovery simulation Left master hand controlling IT industry performance, facing sharp price war, but Supported by improved demand Consumer spending IT industry chips, PC, tele- Communication Demand and spot prices , profit margin, stock prices IT industry excess capacity and Products, market innovation IT industry business spending

Auto and steel demand, prices mechanism simulation: 

Auto and steel demand, prices mechanism simulation Left master hand controlling auto, steel industry performance Auto loan interest rate Auto demand and prices mechanism simulation Steel demand, prices simulation Steel prices, import duty, energy prices Consumer spending

Oil petrochemicals demand,prices performance simulation: 

Oil petrochemicals demand,prices performance simulation Increased demand leading to soaring oil and feedstock prices and costs, cutting into downstream profits, stock prices Currency Oils, heating oil, gasoline , petrochemical , plastics prices simulation Gasoline, heating oil, petrochemical feedstock Prices, costs Consumer spending

Reform and merger/acquisition performance simulation: 

Reform and merger/acquisition performance simulation Post merger integration profit margin hold th key to stock prices performance Investor sentiments Post merger profit margin Pre and post merger profit margin and stock Prices simulation Post merger integration performance Pre-merger, reform goal setting targeting

Corporate governance bubble burst early warning simulation: 

Corporate governance bubble burst early warning simulation Asian corporate scandals bubble early warning Production and sales tracking financial accounting earning tracking Balance sheet and off-balance sheet Derivatives, IPO, merger activities tracking Strategic and execution corporate governance OSA teams tracking internal/ external auditing stock prices Cost accounting bubble tracking Investor sentiments, stock index

Banking Securities insurance riskearly warning simulation: 

Banking Securities insurance risk early warning simulation Asset prices, bubble earning warning provide solution to banking, finance reform Equities market asset Bubble price Housing market asset Prices bubble Industrial sectors Asset bubbles Business, consumer demand Sentiment bubble Banking nonperformance credit default Consumer, business credit, market risks Resulted market bubble burst risks simulation

Causes, recovery of Financial currency energy bubble burst crisis: 

Causes, recovery of Financial currency energy bubble burst crisis Asset prices, bubble earning warning provide solution Asian financial, currency, bubble burst crisis Strong Export growth Excess foreign capital Inflow resulted currency appreciation Export decline and currency plunge Runaway inflation and interest rate hike Stock prices and consumer demand plunge All leading to financial, currency, bubble burst Crisis, recovery will begin until trade surplus And currency rebound, interest rate cuts, stock prices rebound Excess money supply Consumer spending

Strategic QFII and QDII investment risk management early warning: 

Strategic QFII and QDII investment risk management early warning Two mater hands controlling global capital markets asset prices and QFII/QDII investment strategy and risk management Money supply, interest rates Currency exchange rates Investors sentiments Industrial sectors asset prices Bubble simulation Domestic and global market prices And risks simulation for QFII/QDII Investment strategy, risk management

Conclusions and recommendations: 

Conclusions and recommendations Monetary, economic, fiscal policy for sustainable Asian profit growth and prices stability Monetary , economic, fiscal policy, WTO impact on Asian capital markets asset prices simulation, provide 3-6 month ahead early warning is the key to sustainable profit growth supporting strategic banking, finance, enterprises reform