Eric Hoh
Vice-President, Asia South Region,
Symantec

ASIA has learnt its lessons from the financial crisis 10 years ago and has emerged today stronger and more resilient. Countries have made concerted efforts to stay ahead of the curve, from strengthening their fiscal policies and running balance of payment surpluses to building up foreign reserves to cope with unpredictable changes. While we continue to see greater trade integration and investment flows within Asia, imperfections still exist in the regional financial system.

Companies in Asia should capitalise on this window of opportunity to not only strengthen their financial position against these shocks, but more importantly, to adopt best practices to enhance their corporate governance, transparency and risk management.

Crisis very unlikely

Wee Piew
CEO,
HG Metal Manufacturing

I DO not think there will be a currency shock like the 1997 Asian crisis in the next 12 months. However, having said that, I believe that there are a number of risks on the horizon. Firstly, the sub-prime lending woes in the US seem to be widening and the extent of its?? impact on the US economy is yet to be seen. Secondly, there is the?? risk of a sudden reversal of the strong capital and liquidity flows that have been pouring into Asia. Thirdly, there is the often-mentioned risk of the Chinese economy overheating, with an attendant asset bubble.

As a result of stronger economies and capital inflows, I think that Asian currencies will continue to appreciate against the US dollar. This will affect the competitiveness of Asian exports to some extent. However, there is now stronger intra-Asian trade which can offset any drop in exports to the US. In this respect, companies should do more to explore Asian business opportunities like the Middle East and India to mitigate a potential slowdown in the US economy.

Susan Soh
Managing Director,
Schroders

THE appreciation in Asian currencies is not a new phenomenon, but a trend that has emerged over the past few years following a cyclical decline in the US dollar. Asian currencies should remain structurally supported by healthy economic growth, strong balance of payments, a steady pace of renminbi appreciation, as well as an increasing acceptance of Asian policy makers in allowing currency strength to offset the inflationary effects of rising commodity prices.

Given the strong underlying fundamentals, we feel that Asian currencies should continue to appreciate at a steady pace going forward, rather than encounter a currency shock. Companies should, therefore, manage their currency exposures actively.

Ng Kong Yeam
Group Executive Chairman,
Sino-America Tours Corporation

A CURRENCY shock in Asia is unlikely in the next 12 months. The US currency will depreciate as many Muslim countries will no longer have reserves in US dollars. Many transactions with European countries will also be in euros and not US dollars. Countries buying products from China will use the renminbi and not US dollars. Asian currencies will rise but not spectacularly. Understanding the value of the currencies will dictate all transactions, hence companies must deal in currencies in their favour.

Poon Kiang Hau
Managing Director,
FilmTack

FORTUNATELY, the rise of Asian currencies is currently capped by the weakened yen. A currency shock is only likely when the yen begins to appreciate strongly against the US dollar.

Low value-added Asian exporters may face eroded profitability when their earnings are reflected in local currencies. Local corporations involved in international trade should be encouraged to manage their own basket of currencies. The ideal combination for most companies is the US dollar, the Singapore dollar and either the yen or the euro. The Sing dollar is expected to be an ideal balancing beam, while the other two currencies will counter any volatility within this currency portfolio.

David Wong
Managing Director & Chief Executive,
ABN Amro

THE growth potential for Asia is certainly positive over the next 12 months. As such, we shall continue to see strength in Asian currencies against a weakening US dollar, in particular, the peso, the rupee and the ringgit. As for China, we expect a moderate rate of appreciation of the yuan (5-6 per cent per annum), while managing pockets of overheating via other monetary measures through interest and reserve rate hikes.

We do not foresee a currency shock in Asia in terms of sharp currency adjustments. However, central banks in Asia will continue to monitor and pace the rate of appreciation of their currencies in line with their domestic economic agenda. As for companies, they should hedge against a weakening US dollar trend and build capability to manage currency risk on a portfolio basis.

Benjamin Low
Managing Director, South-east Asia and India,
Secure Computing

THE possibility of a currency shock in Asia in the next 12 months is highly unlikely. Since the Asian currency crisis, governments in the region have enforced strict monetary policies to prevent another similar crisis. However, with the recent spike in Asian currencies, companies are forced to streamline their manufacturing and order processes in order to remain cost effective. The positive outlook for Asia will continue to drive Asian currencies upwards and that is not expected to slow down anytime soon.

Therefore, for export-driven countries like China, Vietnam or India, a stronger currency will severely increase the value of their goods and services and decrease their competitiveness in global markets. On the other hand, for Singapore, which relies heavily on imported goods, a stronger currency would mean most cost savings on goods and services.

The rise of Asian currencies is in sharp contrast to the gradual decline of the greenback. As a result, the US trade deficit had reached an all-time high. This will definitely drive the US to rethink its heavy reliance on finished products from the Asian economies.

Companies should have procedures in place to monitor and react to any fluctuation in the currency marketplace. They must spread out their capital holdings in various currencies to even out the risks versus putting all their 'eggs' into any one currency basket.

Shock cannot be ruled out

Lim Soon Hock
Managing Director,
Plan-B Icag

THE US dollar has three factors in its favour which will limit its slide: it is the undisputed global currency, being recognised even in the remotest part of the world; the country is the world's economic engine and is a global technology leader. On the other hand, the opposing force of the continued US deficit will push the US dollar to depreciate further. The two opposing forces will inevitably create a new level of monetary equilibrium, probably by year-end. There will be a currency shock in Asia, albeit temporary.

Any appreciation of the Asian currencies would make our goods and services more expensive for the US, leading to a fall in exports from Asia and consequently to a correction of the value of the US dollar versus Asian currencies, after the shock.

I contend that the US will not allow the dollar to depreciate too sharply, as it is tantamount to a devaluation of the balance sheet of the country. Rather, it would do everything possible politically to arm-twist the European Union, Japan and China to support the dollar.

The domino effect of a US dollar depreciation and a consequent appreciation of Asian currencies cannot be avoided, made worse by the current economic boom in Asia. Companies in Asia, therefore, need to watch their inventories carefully and contain costs. While it makes sense for them to diversify more into the region, especially China and India, when the world's economic engine slows down, it will certainly drag down the economies of the rest of the world.

Tan Kok Leong
Principal,
TKL Consulting

IT IS difficult, perhaps, to rule out the possibility of a currency shock in Asia due to a drastic fall of the US dollar caused by a sustained period of dollar weakness in the coming year. It would be bad for the dollar as it may strengthen the euro's international role as a global reserve currency and increase the international role of Asian currencies.

There would be serious economic and political implications from a sharp appreciation of Asian currencies as it could herald a recession, a rise in unemployment and a contracting economy. The best way to insulate against this seems to be to stay liquid or not be heavily in debt.

Lars Ronning
President, North & South-east Asia, India, Australia & New Zealand,
Tandberg

THE possibility of a currency shock in Asia remains as currencies in this region are still perceived to be significantly under-valued due to monetary controls, strong export figures and high levels of foreign reserves held by Asian central banks.

In such a situation, companies should brace themselves for adjustments in consumer demand levels and business costs, including costs of labour and production. Enterprises which are based in Asia partly for cost benefits might need to re-examine their asset allocation. New monetary regulations might also be put in place to stabilise exchange rates.

However, companies can mitigate these risks by diversifying their main target markets and avoid concentrating their operations in a single region.

No strong impact seen

Peter Rigbye
Managing Director
PASR Technologies

IF THE US economy's efficiency improvements stop or significantly slow in the near future, then there may be some changes to the exchange rate as trade volumes slow. Trade with the US is key so countries like China, Hong Kong and Singapore that peg their currencies to the US dollar to ensure that they have positive reserves in US dollars would need to make adjustments. A company with significant exposure to export revenues should be watching this and undertake a hedging plan at the appropriate time. However, despite the cost of the Iraq war, the US economy is looking amazingly robust.

Tan Ser Giam
Chairman,
Eastern Navigation

THE rapid growth of China and the rest of Asia has attracted more money into the region and strengthened their respective currencies. Pressure by the US for China to up the value of the renminbi will see other Asian countries doing the same to avoid imported inflation from China.

The US dollar will be affected by the large deficits and much depends on whether countries holding the currency will continue to have faith in it. I see the US dollar heading further south and eroding the purchasing power of American consumers. Asian economies will be affected if the Americans buy fewer Asian goods. Hopefully, the money that has found its way into Asia will support a new wave of Asian and Chinese consumerism and the repercussions of strong Asian currencies may not be so badly felt.

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