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SCMP Reporter

WHILE local investors occasionally show signs of fearing the worst, veteran investment banker Maurits Edersheim believes the latest Sino-British dispute over Hongkong is really ''a minor skirmish in what is a finished fight''.

  Described as one of Wall Street's old guard, 74-year-old Mr Edersheim has survived a few skirmishes, particularly the dramatic collapse of Drexel Burnham Lambert in 1990 where he held the post of deputy chairman.

  Now, as deputy chairman of Smith Barney, Harris Upham, he is in charge of the international money management department with about US$1 billion under his control.

  A believer in the long-term investment quality of equities, he accepts that there are risks everywhere, and says the current problems in Hongkong are no different from those suffered by other markets from time to time.

  Speaking in Hongkong yesterday - as the market slipped 2.3 per cent on renewed political fears - Mr Edersheim said his long-term confidence did not mean that ''you can't get nervous from time to time''.

  Although he admitted he remained a little more cautious than some other North American fund managers, his funds were continuing to be overweight in Hongkong stocks, along with those from the United States and Mexico.

  Mr Edersheim revealed a touch of that caution in his latest newsletter to clients, where he recounted that his colleagues felt that China wanted to retain Hongkong as a financial centre, that China was investing in Hongkong, and that Hongkong would prosper as tens of millions of Chinese, particularly those in southern China, openly dealt in Hongkong.

  On a more pessimistic note, he pointed out that sceptics thought China could not leave one part of itself with a much higher living standard than that in all the other parts.

  ''They suspect restrictions will be forthcoming on the economic activities in Hongkong. Even if those are relatively small, they will have a depressing influence on the prices of stocks.''   His conclusion was that, as in many doubtful and dangerous situations, people could probably make money.

  ''If one acknowledges the risks and accepts the volatility from unpredictable political developments, one should have some relatively small investments in Hongkong.''   Born in the Netherlands, Mr Edersheim moved to the US in 1939 and, apart from war service, has remained an investment banker on Wall Street since.

  His primary concern remains the state of the US economy, and although he reckons the new administration's attempts to stimulate growth will lead to ''maybe a little higher inflation'' and a small increase in interest rates, he said these would in turn lead to a stronger dollar.

  He said President Bill Clinton continued to project a young, strong image and had some good ideas - although translating these views into productive policy remained a formidable challenge.

  Despite that, he remains generally optimistic, saying those companies which had been forced to restructure their cost base and reduce the number of personnel would be running more efficiently and would show larger profits once revenues began to increase.

  The present valuation of US equity markets was neither excessively dear nor cheap, he said, and they would probably continue to reward those companies with particularly good results while ''unmercifully punish'' any which did not live up to expectations.

  Mr Edersheim's optimism was buoyed by the retail sales figures over Christmas, which turned out to be much better than expected ''partly due to increased consumer confidence, partly due to a slowly reviving economy and partly due to the feeling that Mr Clinton is going to take measures that will stimulate growth''.

  When asked what might push the recovery off course, he listed two fears. The first was that perceptions might change. In a consumer-driven economy such as that of the United States, perception that things were improving could be as important as the fact.

   If consumer confidence evaporated, it could take the reality with it.

  Mr Clinton's plan to increase taxes would also need to be handled carefully. Higher wage earners would probably see the rate increased from 32 per cent to 36 per cent and there might be an increased tax on petrol or a value-added tax.

  Keeping Congress and the people on his side would prove a severe test for Mr Clinton, Mr Edersheim said.



Sino-UK row 'a minor skirmish' says US banker