Tokyo stocks cheer in the face of gloom
ANYONE still perplexed by the rise and rise of the Hong Kong stock market, which has surged in the face of political uncertainty and economic slowdown in China, should cast their eyes across the Pacific to Japan.
There the Nikkei 225 has fought clear of radical changes in the political arena, a threatened double-dip recession and falling corporate earnings to register 22.5 per cent growth for the year so far.
Politically, there are big expectations. Deregulation is expected to trigger a more robust and competitive environment - retail stocks, seen as a key early beneficiary, are jumping - while the rescue packages, shovelling funds into public works and otherstimulative measures, are being counted on to jolt the economy.
But, as a recent survey by Nomura Research Institute underlines, it is pie in the sky to expect much from the companies themselves soon.
According to the securities house, Japanese companies' current profits are expected to fall an average 14.2 per cent in the year ending March 31, 1994 - although they forecast an 11.3 per cent clawback in the following fiscal year.
Core industries are being pounded by the economic slowdown and the higher yen.
NRI's report shows that one in 10 of the 400 companies surveyed are likely to post losses - broadly firms in the steel, chemical, industrial machinery and airline sectors.
Coupled with surveys released last week showing that many firms are still heavily overstaffed, the report is unlikely to whet foreigners' appetites for Japanese stock.
But selective buying, coupled with a sentiment that obeys no rules and refuses to read the bad side, is likely to continue driving the market upwards, albeit on thin volumes.
Perhaps not so different from Hong Kong after all.