IT seems that David Roche cannot get off an aeroplane, even for a stop-over these days, without people expecting him to reweight the local market - even if it only deals in cattle. But, sitting in Exchange Square yesterday fresh from Kai Tak airport, the managing director of Morgan Stanley International has not changed his Hong Kong weighting. If that is the only thing investors are interested in hearing, then Mr Roche is the wrong person to talk to. In an hour of talking, the issue did not come up. A harassed-looking man with a faintly shabby suit utterly at odds with the power-dressed yuppies strutting Morgan Stanley's office, Mr Roche dealt easily enough with the undignified semi-squatting position he was forced into to have his photograph taken. ''I am not a guru - I loathe that word,'' he said. ''I think a guru is someone who just has it and I'm not like that. ''I am just as gullible, just as vulnerable, just as likely to be wrong as the next man or woman - and maybe more so. As a strategist or analyst, most clients are more intelligent than you are. Your job is to bring ideas and stimulate people. ''Probably we are just court jesters who amuse kings while they lose their kingdoms. I don't have a great investment secret.'' At the end of the hour, ushered into the lift breathless after listening to a roller-coaster of rapid talking from a man pacing round and round a corner office, it is difficult to sort out just what a wise investor should do and what signs he or she should look at. Mr Roche ''poured the acid of scepticism'' on Malaysia and could not think of a reason why the current Morgan Stanley story was wrong. Vietnam is ''in a mess'' but will certainly take off - probably in about five years. And he believes in the continued reform of China. He sees grave political risk in Europe, partly from the risk of tensions in eastern Europe reaching breaking points in countries other than the former Yugoslavia and partly from governments in the West backing away from the pain of reform and beginning areflationary strategy. He is bullish on the US dollar and sees a chance of American interest rates going up. He is concerned that the ''global liquidity driven markets'' story is going to turn out to be a myth. The chemical engineer turned portfolio manager turned strategist, who considers himself an ''intellectual'' rather than a pursuer of wealth, has gripped with his style and his attitude. Diplomatically, he cannot think of an example of a bad strategist. ''Bad strategists don't last long and I don't read other people,'' he said. ''I know the two kinds of strategists I hate because they are both boring. I hate people who make ex cathedra announcements - people who make point targets for the Dow Jones that are not worth anything. And I hate these incredibly micro-economic historical correlation people. ''History is now about discontinuities. The fall of the Wall didn't mean the end of history but very few things can now be judged by looking at the last cycle - all that nifty Fifties-are-here-again stuff.'' Mr Roche said he focused on a small group of things to make up his mind about a market or region. ''I buy markets where there's a story which will surprise people on the positive side. And I sell markets where there is a story which will surprise people on the negative side,'' he said. The story is built from three major components: politics, growth and interest rates, with the last connected to a fourth factor. The fourth factor is money which is not working in the real economy. ''What I am looking at is value. Is this cheap or expensive? You can measure that in different ways - price to book value, price to earnings,'' he said. ''Valuation is related to those four factors and then risk comes into play. ''That sounds like waffle, but I'll give you a simple example: Hong Kong.'' In August and September last year, Morgan Stanley was struck by what it saw as a declining political risk factor. ''I spent my youth looking at two politically risky markets, South Africa and Hong Kong,'' he said. ''You would go in, make four or five times your money and get out. Hong Kong is on a [price-earnings] ratio of 14 while Asia, apart from Japan, is on 23 times. ''The growth is about the same - the only reason for the difference is the politics. If you think the political risks are declining, then Hong Kong looks better. ''Then there was growth. The story then was the reform process in China is unstoppable. There is a unanimity of goals - everyone is seeking wealth. In Russia, there are all these throwbacks. ''Interest rates didn't enter the picture last September but now I'm worried the US rates could go up, so it is a negative factor. ''Then there is money.'' Money is the big cloud on the horizon. ''We all know the liquidity story - there was US global and US money looking for somewhere to go and an immense amount of high-risk capital here because of the different attitude here from Frankfurt, where they put spare money in bonds.'' Mr Roche is now concerned about the ''liquidity driven market''. ''That becomes a self-fulfilling prophecy but something can go wrong,'' he said. ''My clients say nothing can go wrong. But there was tremendous liquidity in 1987 before the crash and tremendous liquidity after the crash. No-one knows what happened, there were all kinds of theories - one was about the Bundesbank not cutting interest rates. ''What happened in 1987 was the direction change. And he admitted that ultimately a judgment about whether a market was cheap or expensive was wholly subjective. ''The price has changed. I am not saying that objectively it is cheap or expensive, although if something has driven the market once, it is a little silly to expect it to drive it twice,'' he said. What is important to Mr Roche is to create ideas with his clients: ''I loathe presentations. It freezes me out to get up in front of 25 investors and I still go through pangs of fear. ''I prefer to say to my clients 'what's worrying you?' or 'what interests you?' and develop ideas with them.'' But he is only as good as the money his clients make. And they do make money, or Mr Roche would not be around - ''bad strategists don't last long''.
