Asia's biggest stock rallies ring hollow
Time for a quick review of Asian stock market performance now that your correspondent's database shows share prices overall within a smidgen of having doubled in US dollar terms since hitting a bottom in September last year.
The winner is clearly South Korea with a market index up 218 per cent over the period in US dollar terms and down only 11 per cent from August 1, 1997, when the region overall hit its peak.
In local currency terms, the winner is Malaysia, up 194 per cent.
But it is only in second place in US dollar terms because its currency was frozen at M$3.80 to the US dollar, a decision made right at the bottom and one which the authorities may yet come to regret.
Then we get Indonesia, where the story has been almost entirely currency movement. The market is up 190 per cent in US dollar terms since September 1 last year because even a rotten fish will bounce when dropped from the top of the national monument in Jakarta and that is what the rupiah has done.
Bear in mind, however, that Indonesian share prices still have been the worst performers in the region since the financial crisis broke in 1997 with a 69 per cent drop in US dollar terms as of last Friday.
Hong Kong rates among the also-rans, down there along with Japan, Taiwan and the mainland's B share markets.
So much for history. The point of ranking these performances is that your correspondent expects that these rankings are likely to reverse themselves over the next year.
And why? For the very simple reason that the biggest sinners are sinning again. They just do not seem to have learned much from a crisis which broke because of consistent misallocation of capital, mostly through government rigging of exchange rates and interest rates.
Take South Korea, a country which has a proven record of being able to make almost anything under the sun except money and which does not seem to care that it rewards investors only with warm feelings of national pride rather than with money.
Nothing much seems to have changed. All that Korea has really done is stuff the earnings from a big trade surplus into foreign investments, starving industry of needed capital to stop the won from appreciating, and then boosted domestic activity with record low interest rates mandated from on high.
It's a familiar example of short-term gain for long-term pain, recovery without reform, an illusion not an achievement.
Same thing goes for Malaysia which has done exactly as Korea has done and, to make it obvious, has returned to its old games such as rigging rubber prices and once again pushing the Multimedia Corridor, a flawed dream of being a world leader in electronics.
Hong Kong on the other hand is an example of an economy in which reform has led recovery, thanks in large measure to the disciplines which the link to the US dollar has imposed. It makes recovery slower but surer.
Look to that industrial nexus of Hong Kong, the mainland and Taiwan to assert itself gradually in coming months. The others have mostly gone too far, too fast for too slow a pace of real financial reform.