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Several Asian Countries Blaming Analysts for Economic Woes

Securities: When gloomy forecasts came true in some cases, government officials alleged market manipulation.

September 04, 1997|From Bloomberg News

As stocks, bonds and currencies tumble across Asia, market analysts are coming under fire from government officials who fault them, not underlying economic problems, for the slide.

Peter Kurz, the head of research at Merrill Lynch & Co. in Taipei and one of Taiwan's best-known foreign analysts, today became the latest target of government ire when securities regulators said they may investigate him for "speculation."

Officials were angered by his recent forecast that stocks were about to slide by as much as 10% as Taiwan President Lee Tung-hui headed into a party congress without a clear majority. Stocks later fell 10% in a week.

"A lot of investors are blaming Merrill Lynch for the plunges," said Hsu Yung-pang, a deputy chairman at Taiwan's Securities and Exchange Commission. Kurz might face jail time, Hsu said, if the SEC determines he "manipulated" the market with his forecast.

Though Kurz was traveling and couldn't be reached, Bob Grieves, a Hong Kong spokesman for New York-based Merrill, said the firm wasn't aware of an investigation and that it stands by its research.

"Our research should in no way be construed as manipulating the market," Grieves said.

Taiwan's government isn't alone in blaming analysts for the market turmoil that's swept the region since Thailand devalued the baht on July 2. Nor may it be the last.

"International investors had better watch out," said Manuel Pangilinan, the managing director of First Pacific Co., a Hong Kong-based property and telecommunications company whose businesses span Asia. The region's governments "will have no incentive to be friendly towards investors who have proved so fickle."

Early today in Malaysia, Deputy Prime Minister Anwar Ibrahim said the country was preparing to fight an economic war launched by "Western syndicates." He said Malaysia could use its internal security laws to arrest market manipulators.

By attacking foreign analysts and investors, Southeast Asian governments risk sapping confidence even further in markets that have already suffered sickening slides. Benchmark stock indexes in the Philippines, Thailand and Malaysia are down almost 40% this year--not counting currency losses of as much as 25% for investors based in U.S. dollars.

Though the criticism may not deter analysts from painting an unflattering picture of a market's or a country's prospects, it's clear many don't wish to get into a public dispute with governments either. Even senior executives at many firms declined to discuss Asian governments' ire on the record. Many analysts said doing so might put their jobs at risk.

They may have reason for concern.

Thai police raided the Bangkok offices of ABN-AMRO Bank and Nomura Securities in mid-July, searching for the source of rumors that the government was poised to close five commercial banks.

The police came away empty-handed. George Morgan, country manager at the Dutch bank's brokerage unit, said at the time that he was "puzzled" by the move--especially since ABN-AMRO was about to buy a 35% stake in a Thai brokerage.

Thailand's central bank assailed Credit Lyonnais in mid-June for publishing what it called an "absurd and irresponsible" research report that reduced its forecast for the nation's economic growth.

Thailand now says that growth won't surpass 4% this year--the slowest since the 1960s.

In Malaysia, Transport Minister Ling Liong Sik said analysts and journalists who issued negative forecasts were nothing less than "traitors," according to the Star newspaper. Such journalists, he said, should be sacked.

One reason Southeast Asia's governments may be reacting so strongly to analysts' criticism and negative views may simply be that they've enjoyed nothing but good news for so long.

"In a bull market, people don't ask the tough questions," said Rosa Wang, bond manager at Peregrine Fixed Income, which manages about $300 million. "Now that we're in a bear market, people are saying, 'Let's look at all the problems.' "

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