Greetings from Hong Kong. I am here on a very short trip to meet the men who matter in the powerful trading rooms of Asia and suss out what the sentiment is like in the wake of the sub-prime crisis. Most importantly, whether the great emerging market bull-run seems intact. Not unexpectedly, opinion is divided. There are bulls and there are bears, like in every jungle.
The one core belief that is quite unanimous is simply that there is no long bear market looming in Asia. The bulls believe the worst is over already and markets will rock from here again. The bears are not convinced, but even they can't see the tough times lasting beyond early 2009. This may seem like a very long time but its merely 18 months, not so much in the context of a four-year-old bull market readying for its next phase.
For the foreseeable future though, the forecasts are mixed. Many pundits believe that it will get quite ugly in the US in the next six months and there will be more "collateral damage" in Asia; for the markets, if not economically.
The next wave of bad news will compress risk love further and money will move out, at least initially. Particularly, money from the global 'punter' tribe who were merrily leveraging away to get a ride on the emerging market boom. This, however, will be replaced by longer-term money from more stable institutions seeking growth where it exists and from non-traditional geographies. This transition will not be seamless, therefore there will be pain.
Finally, growth and fundamentals will prevail, as it always does, but not before there is a proper scare. There are a handful, only a few, who believe that even worse days lie ahead. They point out that the ability of analysts to predict full-fledged bear markets is notoriously poor. The few who have ever managed to do so accurately in the past have relied less on evidential data, more on intuition. They say it's slowly creeping up on us and we are simply in denial. Every time I speak to this breed, I head straight for a good dim sum joint. It just purges away the pessimism. The soul sings again.
Then I call on the bulls. They thump me on the back and point to a rainbow. The storm is over, they assure me. It was just a buying opportunity, they reckon. We have seen half a dozen of these sharp dips in the last four years, this was just another. Sure, there could be some more volatility ahead but nothing that would remotely resemble a prolonged bear market. There's just too much growth here for that. How can you come from India, of all places, and speak of bear markets, they ask me. The extreme bull case is that all Asian markets, including India, soar to new highs soon and do not go back to test recent lows. The more measured bulls believe that there may be another dip or two in the next six months and you may get the market at or around the August lows but thats about it. Buy every dip, they say, as great things lie ahead.
So, what's the takeaway? It's hard not to go away feeling bullish about Asia. Maybe it's the proximity to China, the best performing market in the world, which lends this swagger to Hong Kong. But it still feels like a bull market. With a tinge of fear, which is what you want to see.
This isn't the mindless optimism of the tech bull run. There is skepticism too, trust me. That said, one must note that the Chinese are far more confident than we in India seem to be. About their own growth and their ability to withstand problems of an ailing US. They have a "King in waiting" air about them. Truly. I wish I could sense it in India. And of course, get their dim sum back home. It's to kill for.
(The writer is Executive Editor, CNBC-TV 18)