Asian economies starting to slow down
By Amit Prakash (China Daily)
Updated: 2004-09-28 08:52

Asian economies are slowing as global demand eases for the electronics goods that have driven growth, including laptop computers made by Acer Inc and Samsung Electronics Co's flat-panel displays.

Liang Hong, an economist at Goldman Sachs Asia LLC in Hong Kong, cut her forecast for growth in China to 8.1 per cent from 8.3 per cent. Oh Suktae, an economist at Citibank NA in Seoul, lowered his forecast for South Korea for this year to 4.3 per cent from 5 per cent. Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan Ltd, cut his outlook for Japan, the region's biggest economy, to 3.5 per cent from 3.7 per cent in the fiscal year to March 31.

"We are definitely seeing a slowdown," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney, which manages A$70 billion (US$49 billion) in assets. "What we are seeing now is a moderation in the rate of growth of demand."

The Morgan Stanley Capital International Asia-Pacific Information Technology Index, which tracks 121 technology stocks, has fallen 20 per cent from a three-year high on April 26. The currencies of Japan, Taiwan, Thailand, the Philippines and Indonesia have weakened against the dollar in the same period.

"It's very hard to see most technology stocks rising" in the near term, said Peter Woo, who helps manage US$500 million at Asia Strategic Investment Management Ltd in Hong Kong. "We've had record sales growth this year, and that's unlikely to be repeated next year."

Makers of chips and chipmaking equipment and electronics such as flat-panel screens are trimming their forecasts for sales.

"We've found some slowdown" in demand, said Terry Higashi, chairman of Tokyo Electron Ltd, the world's second-largest maker of chipmaking equipment.

Growth in global semiconductor sales may ease to 20 per cent in the second half of the year from 31.4 per cent in the first half, market researcher ISuppli Corp said on September 10.

"Demand from small and medium businesses is slowing," said Gianfranco Lanci, president of Acer Inc, the world's fifth-largest maker of personal computers.

Intel Corp, the world's third-largest technology company, this month cut its third-quarter sales forecast by about 5 per cent and said inventory is piling up.

Samsung Electronics, the world's second-largest semiconductor maker, this month said it expects global chip sales next year to grow at half of this year's pace.

The outlook for sales of liquid-crystal displays "looks soft," said Lee Sang-wan, president of the LCD division at Samsung Electronics.

Asian central banks are likely to avoid raising interest rates as export growth weakens, said Kim Sun Bae, head of Asian research at Goldman Sachs in Hong Kong. The Bank of Korea this month kept its key rate at a record low 3.5 per cent.

"Interest rates will be tuned to supporting domestic growth," Kim said.

A 73 per cent increase in crude oil prices in a year is prompting economists to pare forecasts for the US, which bought 25 per cent of Japan's exports last year, 17 per cent of South Korea's and 19 per cent of Singapore's.

The world's largest economy will expand at a 3.7 per cent annual rate from July through September, less than the 3.9 per cent pace estimated last month, according to the median of 61 forecasts in a Bloomberg News survey on September 9.

The US economy grew at a 2.8 per cent pace in the second quarter, the least in more than a year, as higher oil prices limited consumer spending.

Growth in Japan, the world's second-largest economy, fell to 0.3 per cent in the second quarter from 1.6 per cent in the previous three months as companies slashed stockpiles. In nominal terms, without adjusting for falling prices, the economy shrank 0.5 per cent in the second quarter.

Asian economies aren't likely to sink into recession as Singapore and Taiwan did in 2001 after a collapse of semiconductor prices and technology stocks led to a contraction, said Robert Subbaraman, senior economist at Lehman Brothers Japan Inc.

"The slowdown is becoming more evident, but it's not pointing to exports falling off the cliff," said Subbaraman, who estimates Asian economies outside Japan will expand 5.8 per cent from a year earlier in the second half of this year.

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