Auteursarchief: inseservices

July 1997

July 1997

July 1997

German Forces for the next millennium – The future of Hong Kong stocks

German Forces for the next millennium

After the re-unification with Eastern Germany the Federal Republic of Germany got in deep financial troubles because of the unexpected high costs of the re-unification. This together with a very slow growing national economy makes the entry into the monetary union very difficult if all conditions set in the Maastricht treaty of 1992 have to be fullfilled.

But even without the monetary union, the German expenditures have to be brought in accordance with the revenues. This will mean more savings on all budgets. The allocation of the armed forces will also be up for an assesment. And if the armed forces are not able to re-engineer their whole organisation structure and the attached political worldview, a number of very important programs will be eliminated and the armed forces will end up as an ineffective dinosaur in a dynamic world.

The armed forces have to be re-structured to meet the challenges of the future. They will have to improve their capabilities and at the same time do their utmost to limit their part in the national budget. Further they will have to give the greatest possible support to the defence industry. The survival of the defence industry is a part of the defence of the country. It is responsible to deliver the best possible equipment to the armed forces and to maintain its high technological know how. It will be however difficult to perform this act on the rope but it is possible.

The army

The German army, the largest of the three services, is divided into the main defence forces and the reaction forces. The idea behind this plan is not bad, but it is to much aimed at the problems of the past. The army have become through the division in main- and reaction forces a divided force, the reaction forces will be the modern attractive force while the main defence forces wil be the outdated force which even have not enough means to train and maintain their, respectivily, personell and equipment decently. Already a large part of the rolling stock of the main defence forces are unable to do their job. And the difficulties will only increase in the future.

There are also three major problems within the army. First, the army is divided into two parts. Second, the divided forces will not be able to work together and in a lesser part will have difficulties in co-operating with allied forces. Third, there are not enough funds available to maintain and improve the reaction- and main defence forces.

The above mentioned problems have to be solved if the German army wants to be reckoned with and fullfill their tasks. Like to improve the operability of the forces, to maintain an effective modern force and support the national industry. These goals can be reached, and at the same time save some money, but the army has to be changed.

Since the dissolution of the Warsaw pact the security situation have been changed dramatically in the world. The clash between the massive forces of East and West is now a thing of the past. To meet the threat of the future the armed forces have to be mobile but also need the highest possible form of protection. Information technology will thereby play a vital role in intelligence, planning and execution of future military operations. There will be a digital revolution as is now happening in the US Army XXI program.

The German army has to conform to this revolution otherways it will be left behind in operational capabilities. The army with its main and reaction forces will be to large to change to a digitised army. It is also to large to modernise its equipment on a one for one basis.

The security environment makes it possible to limit the number of divisions necessary to fullfill the defence needs of Germany and at the same time be present at some multinational operations.

For example the number of divisions could be reduced to 3 armoured, 1 mountain/light infantry and 1 airborne division. To improve the sustainabiltiy and maintainability the square division should be re-introduced. This will mean that the total number of brigades will be 20 or maybe 21 brigades.

These brigades will be modernised to full digitised status with new or modernised equipment, instead of an army with outdated and partly updated equipment. The number of MBTs needed can all be modernised to A5 status, every division would get its own batallion of Tiger battlehelicopters and this equipment could be maintained and the military trained properly.

The armed forces should be reduced by around 60.000 men, this can be reached by eliminating a number of brigades and by streamlining all headquarters and support and maintenance forces.

The reductions in manpower generate savings of 1.8 B. to 2 B. DEM a year. Further results of the reduction is a large pool of equipment which has to be repaired and which can be sold or delivered at friendship prices to neighbours and allies. This will bring another onetime 1 B.+ DEM. Another advantage is that it will bring work and future customers to the German industry. The savings and extra profits can be used to reduce the defence budget and at the same time modernise the defence equipment.

All these measures improve the fighting power of the army, deliver the defence industry work and a secure long term equipment planning, savings in the defence budget and maybe most important trust in the future. The industry can prepare itself on a steady demand of the army with production runs which are acceptable. For example, the number of new MBTs needed would be aroung 1800 to 2000. Together with the export potential this would mean at least a production run of 3000 vehicles. The same is true for all other equipment producers.

The Air Force

The air force and the navy will be relativily untouched by the changes in the armed forces. The air force has to be modern and up to date. The security situation gives us the one time possibility to limit the number of air planes available in the coming years but it will give us a full capability within 5 years. This includes the absolute necessary introduction of a new air defence fighter, the Eurofighter.

But also the air force will experience some losses in staff. It has to change their organisation structure about divisions and wings. This will bring a number of savings and at the same time limit bureaucrazy in the air force and increase efficiency in the air force.

The air force has to rely in the future on a squadron system for its (strike)-fighters, a bit like the US Air Force. The number of planes in each squadron has to be increased to 24 planes a squadron. The air force will end up with 6 squadrons with the Eurofighter for air defence, 5 squadrons with Tornado in the strike role, 1 squadron Tornado ECR and 1 squadron Tornado in the recce role. This can be completed in the medium future by another 5 squadrons of CAS/BAI or multi-role planes. These multi-role planes are nice to have and are only than affordable if the economy allows it, but it will be a boost towards the German aerospace industry to participate in the development of a plane like the JAST.

Beside the forces listed above the German air force should also possess a dedicated rapid deployment force or UN support force. This wing should consists out of a squadron air defence planes, a squadron strike planes, a flight of Tornado ECR and a recce flight.

In the mean time before the introduction of the Eurofighter the organisation structure has already to be changed to the new one. The number of planes should be increased in the air defence squadrons to 18 F4F planes, later 24 Eurofighters, and the Tornado squadrons have to be transformed as soon as possible.

The change to the force structure as listed above will bring savings in money and equipment. Until the introduction of the Eurofighter the number air defence planes, F4Fs, can be reduced to about 110 to 120, including the training planes in the U.S.A., and excluding 18 MIG 29.

The changes proposed here will result in a more efficient and cheaper air force, which will be able to fullfill all operations which are demanded but which is also up to date in equipment, including the Eurofighter, a new transport plane (FLA) and possibly a new CAS/BAI or multi-role plane.

The Navy

The navy, Marine, the smallest of the three forces will experience no cuttings in the number of staff. They are like the air force better structured to meet the challenges of the future, they are the least bound by cold war structures.

But the navy has to accept a short time cut in their capabilities. This cut is necessary to cut the costs of running the fleet and    to prepare itsef for the next century.

The navy should lay off the three destroyes of the Lütjens class, the operating costs of these ships are relativily expensive and they are experiencing some other problems with the ships. Reduce the number of type 206A submarines to eight, if the first four type 212 submarines are introduced, the two oldest frigates of the Bremen, F 122, class should be eliminated simultanous if two extra F 123 are introduced and finally the missile FACs should be withdrawn quicker than planned.

This would give the defence budget some extra breathing space and would make a some funds available to make some lead-in investments to a new capability of the navy.

The navy should have the funds to acquire over next 5 to 8 years another two Brandenburg, F 123, class frigates, six type 124 air defence frigates, another four type 212 submarines, introduction of the first of the 15 type 130 corvettes by 2002 and finally four type 702 replenishment vessels should be introduced between 2000 and 2004.

This program seems to be very large but it would create a credible naval force which is up to the high demands of the future. The savings which could be made now, a balanced budget and the re-organisations in the armed forces would make this plan possible.

Another advantage of this plan is the boost to the naval industry which would get an balanced delivery schedule on development and production for the future.

Accepting a capability loss now will mean a stronger and better balanced navy in the next millennium. And the strategic situation allows us to redesign the armed forces and at the same time balance the national budget without endangering the security and political ambitions of Germany.

Conclusion

There is at the moment a need in Germany to cut the expenditures of all departments. The armed forces will also have to pay their part.

The role of the armed forces should be evaluated. The changed security situation places a new demand on the armed forces. It is the duty of the armed forces to conform to that situation and meet the challenge.

The aims of the armed forces can be compressed into:

– save money;

– improve or maintain military capabilities and still be able to fullfill all demanded orders;

– and stimulate the defence industry.

All these aims can be met by a reduction in manpower and by a shift in organisation structures and doctrines.

The army has to reduce its manpower by 60 to 65000 men and the air force by 5 to 10000 men. These cuts will save over 2 B. DEM a year. These cuts are possible through a reduction in fighting units and major change in the command, support and maintenance structure. The number of second line, support, forces can be limited through the use of new technologies and a more efficient organisation.

Further savings are possible through the reduction/elimination of equipment. The savings on maintenance of these old systems are already respectable. The equipment can thereby be sold and will deliver another extra saving to the armed forces. We should not forget the defence industry who will gain double, first by repair orders for the redundant equipment and second by getting new clients to whom the goods are sold.

The benefits from the sale of redundant equipment of the army, air force and navy will be around 2 to 2.5 B. DEM. The savings realized through the decrease in maintenance can be estimated at 800 M. DEM a year.

The profits from the sale of equipment are enough to finance the lead-in costs for the production of the Eurofighter and Tiger and for the procurement of two frigates. All other modernisaton plans can be fullfilled through the yearly savings on maintenance and personell. The plan we envision will also give a reduction in the defence budget of 1998 and 1999 of 1 B. DEM each year. The budget for the year 2000 will however have to be raised again to at least the 1997 level, not accounting inflation, to meet all our modernisation plans.

The German armed forces can meet the high demands of the next millennium. The strategic situation gives us the opportunity to change the armed forces without endangering Germany. And, maybe the most important asset, it will bring hope, or a chance for the German defence industry to play an important role in the European defence industry. And this is for the best of the German economy.

The future of Hong Kong stocks

This month will see a change in the position of Hong Kong. It will return to the motherland. It can be an opportunity to even more growth than ever before. If the Chinese government can hold its promise not to become directly involved in the Hong Kong economy and if Hong Kong can improve its infra-structure with the Chinese backlands it will have a very promising future.

Hong Kong has the capital and know how to become the centre of development of a very large part of China. If it can live up to those expectations a number of Hong Kong stocks possess the potential to grow over 25 % this year. The Hang Seng index could be easily over the 17.000 mark at the end of the year.

This is however an optimistic picture. If the Chinese take to much influence in the Hong Kong politics the economic dynamic could be stopped. Hong Kong could turn into a liberalized version of Shang-Hai with the same problems with growth and development.

The Hang Seng could become very volatile and in the end loose ever more of its important position in Asia. The best way to handle this situation is to keep your investments in Hong Kong but hedge them against fluctations in the stock market. Normally we do not like to hedge our investments, we do like to build on the strength of a market and its best stocks. But in this special situation you can protect investments with options running for three and six months.

At the end of the year the situation has to be evaluated and then we will know more about the intentions of the Chinese government. It will however be very unlikely that the Chinese government will destroy the economy of Hong Kong. It is to valuable and they themselve have invested to much capital into Hong Kong to destroy it. They have to protect their holdings from unwished developments. It seems also more likely that they will support the economy of Hong Kong more than ever before.

So for now we still believe in Hong Kong as a promising market with a prosperous future. Our advice is to stay involved in Hong Kong and even enlarge your holdings of stocks in the Hang Seng, especially the blue chips. The blue chips will be on the long term the more stabile and profitable. They offer the best between investments in China and international connections and investments.

Standaard
June 1997

June 1997

June 1997

Indonesia, a country at the crossroads – Lean but not mean – A financial update

Indonesia, a country at the crossroads

Indonesia the island rich country with many peoples and cultures are at a point where the upcoming new intelligentsia/elites are questioning the right to govern of the sitting government. In the last thirty years or so the country has been under the rule of president Suharto and his Golkar party. The regime can not be described as a social democratic example but the achievements of the last three decades are remarkable.

Indonesia has transformed itself from a poor underdeveloped country, with a per capita income of under 100 U.S. dollar to a developing country with a capita income of over 2.500 US dollar in 1996. It even can be considered as one of the new tiger economies with annual growth figures of over 8 percent.

The economy and the businesses are doing fine but the people of Indonesia also did get a share of the wealth. Hunger has been eliminated, housing has been improved and all get a basic education. And the people who are living in larger towns or cities are even getting a higher education.

There are problems of creating enough jobs in Indonesia but if the economy can maintain the growth of the last years things will work out allright.

The many youngsters who have experienced no hunger, have received a higher education but also have some difficulties in getting a job are questioning the integrity and capabilities of the ruling regime. Which admittedly have been involved in nepotism and are creating a state where large groups are maid dependent on the government by jobs and subsidies.

The irony of it all is that those who benefitted most of the Suharto regime want now some change, the youngsters with the support of the opposition want to change the government. They are convinced that the social-, political- and economical situation can be improved if they are in power. They do not have the patience to wait and are now trying to convince to people of their ideas by talking but also by violence.

But the regime of Suharto partly through thier policy of grants still receives a lot of support in the countryside. And this with the support of the armed forces, the bureaucrazy and the better off in the cities will guarantee a majority in the election for the president and his Golkar party.

It is still to early for the opposition to claim victory, they are not yet able to change the outcome of the election. Suharto will get the chance to continue the work it started three deades ago. This will be good for the business community because the unrest created by the opposition during this election is not very good for Indonesia and in particular to the business and the trust needed to to attract capital from abroad.

The Indonesian society has been changed and the youngsters of now will get a chance to introduce some of their ideas and limit the the power of Suharto and his family but not so radical as wanted. They will have to wait for another five to ten years to gain enough support to replace Golkar. But notwithstanding all that Indonesia is already at the crossroads to a new era where the country will move towards a developed democratic society with a strong opposition party.

Lean but not mean

During the last ten to fifteen years the business community has been shaken by reorganisations. The companies had to change to survive in a increasing global competition. In essence sales had slumped, cost increased and competition from cheap labor countries increased.

The recession forced a lot of companies to adjust to these new circumstances. Even the largest of companies were forced to rethink and evaluate their strategy, organisation and products. A lot of consultants came up with theories of re-engineering, core-activities, cost-reduction and the capital market also wanted their share with shareholder value.

The companies in need responded mostly to the advice of the consultants by a combination of cost-reduction and selling companies which did not belong to the core-activities of the company.

Cost-reduction translated itself into the elimination of the labor cost because they are relativily expensive and above all very easily implemented with quick results on the balance sheet. The sale of parts of the company which were accumulated during the fat years and the hype of diversification also increased the profit and reduced costs.

The little tricks, of cost cutting and selling off, which were used worked out well on the short term, the stock price went up, the profits increased and the company looked good again.

After five to seven years the sales and profits went down again and the same was true for the stock price. And again more cost could be reduced by firing more staff and by the elimination of costs like research and development, cleaning and catering and so on. The same trick worked again. But it was not a solution to save the company on the long term. It was simple a way of downsizing in capabilities which improved productivity but at the cost of lesser possibilites for the future.

The theories of re-engineering, cost-reduction and only keep on core-activities are good to use to become lean and mean. But the way in which they were used only resulted in a lean company without any strategy or vision for the future. And to survive on the long term it is necessary to become both lean and mean but not to lean because there is some fat necessary to introduce innovative processes and products.

The idea about lean and mean is eliminating unnecessary costs to improve productivity and to become mean by creating an efficiënt and effective production base and at the same time invest in the future by maintaining a credible R&D department which is in touch with the customers to satisfy their needs and wishes.

A company has to have a well defined strategy, a flat organisation, a balanced financial policy, an open and sensitive R&D capacity, a flexible production capability and a custom minded sales department. It is easy to define the conditions for a successfull company but often difficult to implement. Which became clear after a number of companies had to reorganise themselves several times to maintain the same return on investments.

If to much attention has to be given towards the balance sheet and share holder value a company will become lean but not, which is as important, mean. If companies do not respond to the demands of the future they will miss the train and a second chance is nowadays impossible.

A financial update

The markets performed well last month. May was this year not the month of “sell in May and go away”. Nearly all markets where in a winning mood, with the exception of the CAC 40. The CAC 40 experienced a downturn after the first round of the election showed up with bigg losses to the conservatives and a possible take over of the left. But what will happen in the coming months is still open.

The forecasts for the economies of the world are promising for the Americas, Europe, including Eastern Europe and Russia, Japan, Hong Kong, Philipines, Taiwan, Malaysia, Australia and under circumstances Indonesia. The other forecasts for the other South East Asian countries are bleaker. They will not be able to achieve the same growth figures as before.

Even if the U.S. stock market is expensive there a number of stocks which continue to offer growth. On our short list of U.S. stocks are the following listings: Citicorp, J.P. morgan, American Express, Bell South, Compaq, Motorola, Sun Computer, Sun Microsystems, Lucent Technologies, Procter & Gamble, General Electric, Textron, Pfizer, Eli Lily, Exxon and Boeing. As promising companies we also advice AT&T, IBM, Schlumberger and Texaco.

The Japanese stock market will continue the growth which started to take off this year. The companies we still like: Sony, NEC, Matsushita, Mitsubishi Corp., Mitsubishi H.I., Toyota. Two other companies which we like to include on our list is Canon and Yamanouchi Pharma.

In Europe we also still see some possibilities. In the United Kingdom we upheld our advice for Beecham Smithkline, British Aerospace, British Airways, British Petroleum, Cadbury Schweppes and Barclays Bank. Further we see some potential in British Telecom, Glaxo Wellcome and Tesco.

The German stock market is being influenced by the precarious situation of the German government budget. But the following companies will still show some growth; BMW, Daimler Benz, Allianz, Deutsche Bank, Dresdner Bank, Siemens, Bayer, Hoechst, VEBA, Viag, and Thyssen. But also RWE and Metro are promising, and if you want a more risky investment Hochtief is what you are looking for.

The biggest gainer of last year is Switzerland and one might ask how long they can continue this. The pharma giants Novartis and Roche will continue to be good investments. This is also valid for UBS.

Another difficult market is France. The French elections damaged the growth of the French stock prices. And these could loose even more ground if the socialists will win the the election. The damage could be limited if the socialists would continue with the policies to introduce the Euro and support the European integration. The CAC 40 will be an interesting market in June because the big slide of May will restore in June. The level of restoration will however depend on the policy of the party which will win the elections. June will consequently be a very good time to buy into the CAC 40. Companies like Elf-Sanofi, LMVH, L’Oreal, Carrefour, Canal +, Soc. Generale and Total will offer some very good growth chances.

Standaard
May 1997, II

May 1997, II

May 1997, II

Counter the terrorist threat

Terrorism

            Terrorism, the curse of mankind. Terrorism in one of its many forms exists already for many, many years. But in the second part of the twentieth century it became a more imminent danger through the use of modern very powerfull weaponsystems and the shift to civilian targets.

Terrorism and resistance could be seen as the same side of a coin, it depends on the viewpoint at which you are looking at the phenomen. But it is always aimed at the power which is in charge, legally or illegally.

But the right or wrong of terrorism is not the subject we are talking about. We will talk about the means terrorists are using and how to combat them.

The terrorists armory

The weapons of the terrorist are mostly military style weapons and the home-made weapons. The category of military style weapons range from normal conventional pistols, assault rifles, machine guns and rocket launchers to anti-personell and anti-tank mines and other forms of explosives.

The home-made weapons are mostly a combination of explosives like C4 or Semtex with a makeshift fuze and timer. But also the explosive can be home-made which ofcourse mostly will result in a very powerfull but also very unstable device. It is relatively easy to construct explosive devices, a talented science student or even an average intelligent person can put them together from house, kitchen and garden equipment.

A new threat could emerge if a terrorist group is starting playing around with NBC devices or the possibilities in the advanced technological society.

The NBC threat should not be overestimated because there could be difficulties in building them and especially in using them. I would not say it is impossible to build a nuclear device but it is certainly difficult to create the right infra-structure and get all the necessary ingrediënts together. The construction of a biological or chemical device is much easier. The lab and the construction facilities can be build into a large house or even better a farm. The ingrediënts of a BC device are mostly obtainable in the open market. Most of the items needed are also necessary in the production of normal civilian products. The building of the weapon is not the problem, the problem is the effect of NBC weapons. The implications of the use of NBC weapons are so devastating that there is no advantage in using them. NBC weapons are only usefull as a threat not suitable to be used.

A more realistic threat to society by terrorists is the use of information technology. Most of the important parts of a modern society are controlled and steered by computers. Energy supply, airspace control, defence systems, financial markets/banks and so on. All those computers run on software and are in some way connected with each other. The introduction of a virus could easily derail a whole society. The relatively easiness to build a virus and the harmfull effects in relation with the little danger during a virus assault on the computersystems will give terrorist organisations a easy way of making a statement and to fight for their cause. This is the danger which is very present to the society.

Counter Terrorism

The elimination of terrorism is possible by trying to eliminate their causes and by good intelligence by the law-enforcement organisations. All other means to counter terrorists are only usefull in limiting the actions of terrorists but in the end not effective in stopping the terrorist threat. For example scanners for explosives and weapons. It is very usefull to have them, especially if a weapon or bomb is intercepted, but no scanner is 100 % certain and there are other ways to get the weapons there where you want them if you really want to.

The same is true for systems to counter assaults on computers. You can install anti-virus programs, build fire-walls and tunnels to eliminate unwanted programs and communication but there are always ways to get around them. It is a race between breaking the defence and building a new defence against unwanted programs.

So the most effective way to eliminate the terrorist threat is based on actions and the position of the government. All terrorist organisations are based on a perceived injustice by the government. The government should try to eliminate or minimize the causes of those groups. By doing so the terrorist organisations will loose a lot of support and they might even be persuaded to give up the armed struggle and fight instead in the parliament. This is also valid for groups who want to overturn the society. Because with every action of the government to eliminate perceived injustices the terrorist organisations will loose the support they desparately need and make them more vunerable to the actions of law enforcement.

The other defence against terrorism is good intelligence, the law-enforcement organisations have to identify all possible sources of trouble/injustices and the people which are in some way connected with those troubles.

The groups have to be watched but not suppressed because then you will loose them out of sight and they become uncontrollable. If there is a group which have turn violent which is not yet listed use the same method. Identify the causes/reasons to become violent, indentify the people with a interest in those causes and watch them and interrogate the surroundig environment. Only by applying these common “police” methods it is possible to circumvent terrorism or stop it shortly after it has surfaced by arresting and putting before a court of justice the violent group and dissolve the aims they were trying to reach.

Additional powers to the law enforcement organisations and more laws to create a false sense of security are absolutely not necessary. They will only be contraproductive.

 

Standaard
May 1997, I

May 1997, I

May 1997

Investing in South-East Asia

Introduction

After more than a decade of double digit growth figures, the economies of South-East Asia are showing a slow down. Where you could nearly invest randomly in every company a decade ago, things get more difficult now. There are only a few companies left on each market which continue to promise a respectable growth figure on the short-term future

In this report we will look into the possibilities of the following countries; Thailand, Malaysia, Singapore, Hong Kong and Indonesia.

Thailand

The Thai economy is in a bad shape, the local currency is devalued, the solvency is downgraded, the infra-structure is collapsing under heavy traffic, the industry is experiencing over capacity and the financial markets experience a near collapse because of bad loans and of a bad internal organisation.

Thai stocks are also this year not on our list as an investment opportunity. But in two or three years the situation will probably be improved considered the financial resources available to the Thai government and if the problems with the infra-structure, industrial organisation and pollution can be solved.

Malaysia

The Malaysian economy is showing a better performance, they have not yet reached the development level of the other “tiger” countries, like Singapore, Taiwan and Korea, and therefore possess still some nice opportunities.

The reasons behind the growth possibilities are the natural resources available to Malaysia, the space in legislation, the rising internal demand, the government supported projects which have just started or are near to implementation and finally the cost of labour in relation to their skills.

There are also a number of stocks which are looking very profitable. The sectors interesting to invest into are finance, oil, property and technology related. In the financial sector for example Public Bank and Malayan Bank, in the oil sector Petronas Gas, in the property sector Shah Alam Properties and Sime UEP Properties and in technology/engineering Telekom Malaysia and Utd Engineers.

Singapore

The economy of Singapore is one of the most developed in the region. It is still a good place to establish the regional headquarters to serve the South-East Asian market. But because of the high prices of real estate and labor it is only usefull for management, R&D and high tech production.

The profitability of the Singaporean stock market is not going to show the growth of the preceding decade. The Singapore stock market is to expensive and the industry can not gain growth anymore just by increasing the input of labor and money. Instead it has to infuse technology and lean organisation to induce growth and this is much more difficult to realise.

The stocks which will probably survive the downturn best are the Development Bank for Singapore and Singapore Airlines. But this is no guarantee, to many large investors are slowly reducing their holdings into the Singaporean stock market, and this will in the end hurt all stocks very badly. To enter the stock market again will be profitable if the market has lost a least 15 % in value.

Hong Kong

The financial and trade center of Asia is awaiting the reunion with China, this is a possible inducement to further growth or, which is rather unlikely, the collapse of a prosperous economy. Hong Kong is possibly the most promising market of Asia. The financial and trade skills of Hong Kong combined with the availability of cheap labor and the immense market in China is giving the Hong Kong stocks a chance to realise double digits growth figures.

            With limited risk it seems a good idea to invest in some of the most promising stocks at the Hang Seng. Especially the financial sector and large conglomerates seem to offer the best growth chances. We expect for example in the near future a lot of Hang Seng Bank and HSBC in the financial sector. Other prospects are Hutchinson Whampoa, New World Development, Shangri-La Asia, Shun Tak Holdings, Sino Land and possibly Swire Pacific.

Indonesia

The economic development of Indonesia is showing some very good numbers in the previous decade. It has become an attractive place to invest some of your funds. But as usually there is a big “but”. Beside of the economic achievement there are large problems between the ruling regime and the opposition party, with the different ethno-religious groups in the country, the independent movements in several parts of the island rich country, the lacking infra-structure, the unequal distribution of wealth and the accumulation of financial and political power around the president and his family.

Indonesia is as said before a country with a lot of opportunities, it has a lot of natural resources, a large potential market, a relatively skilled workforce and an innovative industrial sector which is continiously improving and expanding itself.

The stock market in Jakarta is therefore an image of the situation of the country. On one side it is a booming and very promising market but on the other side the internal problems and the lack of infra-structure outside the island of Java is going to impede the growth of the market and it will probably destroy the gains which are realised before when there is an outburst of religious or political violence.

If you are willing to take a risk the best investment opportunities are given by the exploitation of the natural resources, the food/basic industry companies and the conglomerates.

Conclusion

            There also still a number of options left to invest, Hong Kong and Kuala Lumpur are offering the best possibilities. The economy of both is in very good shape and even more important there are a lot of possibilities in the future.

The most risky are the stocks in Jakarta, the economy is growing and the stocks seem to offer a profit over the next years. But this can be very easily destroyed because of internal unrest or to little investments in the infra-structure which is an imperative to growth.

The worst options are offered by Singapore and Bangkok. Singapore because of the expensive market and lesser economic growth. And Bangkok because of a slow down of the economy, organisational problems and bad loans in the finance sector and a nearly collapsing infra-structure.

Standaard
April 1997

April 1997

April 1997

Securing your investments – The Zaïrean dilemma

Securing your investments

The U.S. stockmarkets showed their volatile behaviour in March, the underlying fundamentals are allright but the pressure of a rise of the interest rate and the disbelieve of a number of traders in the potential of the markets turned the market in the first weeks of March negative. The certainty of an intrest rate rise made the markets getting stronger, a lot of listings stabilised and a few grew.

The coming month, or even couple of months, will be a time of defensive investing in the U.S. and expensive markets in Europe. The most promising markets for next month will be Germany, Italy and some emerging markets in South America. Especially South America is promising to be the most profitable in 1997.

To maintain a profit in your U.S. portfolio you shift towards a number of international established firms and some technology companies. With these companies in your portfolio you should be able to counter the downward trend and even make some profit. In the financial sector we continue to advice Citicorp, J.P.Morgan and American Express, we expect some bigger growth in the next month from South Western Bell and GTE in the tele-communications sector, where as it could be very interesting to buy into Compaq, Motorola, Sun computer, Sun microsystems, Lucent technologies and Honeywell in the IT sector. Other interesting companies to invest into are Procter & Gamble, diversified companies like General Electric and Textron, pharmaceutical companies like Pfizer and Eli Lily, we also still like retailer Sears and further companies like Exxon and Boeing.

In the Asian markets we are still considering Japan as a market to return to better times in the third or fourth quarter of 1997. On the Nikkei 225 we are still holding to companies like Sony, NEC and Matsushita in the electronics sector, conglomerates like Mitsubishi Corp. and car producer Toyota.

In Europe times are getting better for markets like Germany and Italy. In countries like the Netherlands and the United Kingdom the markets get a little overvalued and are very much influenced by the happenings in the U.S. This means the stocks will behave faster and more intense to changes in the economy. In the U.K. British Aerospace, British Airways and British Petroleum continue to offer some growth potential where as companies like Cadbury Schweppes and Grand Metropolitan and Barclays Bank in the financial sector offer the best growth chances.

The best investments can be maid in Germany, the companies there are in a very good position and are still busy restructuring themselves to operate efficiëntly on the world market. In the automobile sector BMW and Daimler Benz, in the financial sector Allianz, Deutsche Bank and the Dresdner Bank continue to offer growth. The same is true for MAN, Siemens, Bayer and conglomerates like VEBA and VIAG. Finally the biggest gainers in Germany will be the steelproducers Krupp-Hoesch and Thyssen if their coöperation is to work out well.

In the very expensive markets of Switzerland, Novartis is going to show some impressive growth. The CAC 40 in France is also listing a few companies which benefit from the economic “boom” in the world. The companies all belong to the consumer products/retail industry. Companies which promise to offer some profit are ELF-Sanofi, LMVH, L’Oreal, Carrefour and the entertainment company Canal+.

But with all your investments you should be aware that the markets will be very volatile and a major correction of 5 till 10% in the coming two months will be very likely. Although proper portfolio management should minimise your losses or even avoid them.

The Zaïrean dilemma

The conflict in Zaïre is still going on and there seems no political solution possible on the short term. The military advance of the ADFL forces of Laurent-Désiré Kabila against the government forces of president Mobuto seems to be unstoppable. And possible negotiations between the two sides will be very complicated because of the divergent interests of the two parties. Mobuto wants to keep the power and eventually share it. Where as Kabila wants to reform the government which is impossible as long as Mobuto has a more or less important role to play in that same government.

The ADFL, Alliance of Democratic Forces for the Liberation of Kongo-Zaïre, is using the same strategy as the querilla forces in Uganda and Eritrea have done who are now in power. It is a strategy of encircling the government forces but give them a way out, it is also avoiding nearly all risky military operations, limits casualties on their own side and simultaneous to the military advance a civilian government structure is introduced who has nothing in common with the old political structure. The people have, according the theory of Kabila, to be involved in governing the country, they have to feel responsible for rebuilding their nation. It is a way to rally people behind an idea and get support for your policy.

The forces of Kabila nearly control all areas east of the river Zaïre and they will soon take over the mineral rich provinces of Shaba and upper Zaïre. This will be a boost to the war-chest of Kabila and consequently another nail to the coffin of the power of Mobuto.

The political system of Mobutism drove the country to one of the most impoverished of the world. And this government initiated looting and corruption destroyed all possibilities of Zaïre to gain some wealth for their people.

The victories of Kabila are based on the popularity of Kabila, he promisess some hope for a decent future for the Zaïrean people, and the bad state of the warfighting capabilities of the national army.

The question remains what will happen, does Mobuto give up power, is Kabila capable of conquering the whole country and more important can he keep Zaïre together and finally what is the real power of Kabila in de ADFL?

It seems unlikely that Mobuto can maintain his position as president, he has no means to keep up that position, the bureaucracy and his army are to weak and divided to do so. It is just a matter of time before his fall will be a fact of live.

If Mobuto has stepped down it will become increasingly difficult for Kabila to keep his forces together. The main aim of the uprising has been eleminated and internal power policies will start their own live. Every “leader/war-lord” in the ADFL, in Zaïre and their possible foreign backers in Uganda and Rwanda will try to gain as much power as possible. And the mineral rich provinces might try to gain independence. The wish for independence has already surfaced several times and every time foreign forces, under UN flag or not, were necessary to destroy the independence movement, for example, in Shaba province.

The important question is; does Zaïre remains one country? After the step down of Mobuto the fighting will cease. The simultaneous program of setting up a civilian structure in territories which the ADFL has conquered will help Kabila to keep Zaïre together but you need more than a governmental organisation to do it. It is up to Kabila to enforce quickly a common cause to keep Zaïre united. He has to offer a program which makes sense to all leaders that a united Zaïre is beneficial to all sides/political players. At the same time he has to getaway from the influence of the support which has been given to the ADFL by “friendly” neighbours like Uganda and Rwanda. All those parties have their own policy which is likely not to be in the best interest of Zaïre.

Another internal problem is that Zaïre is in essence a very wealthy country if you consider the mineral resources and its agricultural possibilities. Therefore it will be very tempting for the new rulers not to do the same thing as the Mobuto regime has done in the former decades, use the resources of Zaïre to boost their own wealth. And what is even more dangerous to the unity of Zaïre, and especially to power of the ADFL of Kabila, are the ambitions of the several provinces and local leaders to establish their own little kingdoms.

The ghost of dissolution is closing into Zaïre, the ADFL has a lot of different foreign supporters and it has to rely largely on a Tutsi led army to secure their powerbase. The “new” rulers has to resist the temptation not to exploit the country as done by the Mobuto regime. And finally the several provinces must be kept in the fold of Zaïre. It can be concluded that a change is necessary in Zaïre and the first governmental actions of the ADFL look very promising but the inherent problems associated with the ADFL power-structure must be kept under control. Otherways could the victory of the ADFL in the end become the splitting factor of Zaïre. And that is absolutely an unwanted development.

 

Standaard
March 1997

March 1997

March 1997

Is it time for a correction?

After nearly two years of continued growth on the major markets of the world the questions arises: “can this go on forever. shouldn’t there be a major correction? Ofcourse no market can grow forever, every bull market has to turn sour at some time. But in the long run all stock markets are in comparison with other investment opportunities the best performers over time and consequently the best way to secure a major part of your portfolio.

All major markets are identical in that the stocks get, through the impressive growth, overvalued in price-earning ratios and yield ratios. As most price-earning ratios are moving into the twentieth range and the yield ratios into the two to two point five percent. The earnings are therefore largely dependent on the growth of the stockprice.

These high ratios could become a limit on the growth of the stockprice but this is also highly dependent on the development of the economy. The underlying fundamentals of the stocks are still in very good shape, the inflation is low, state expenditures largely under control, the value of the leading currencies in balance, the demand after products is showing a steady growth with an inclination to faster growth, the overhead costs are limited because of the heavy restructuring of the last decade and finally the large financial reserves promise a lot of opportunities to commit research and development to secure the future.

A fundamental and technological analysis of a number of stocks from the leading stock markets like NYSE, Nikkei, FTSE and Dax are showing a positive indication towards further growth of the stockmarket. Most of the companies possess still growth potential which means a rising stockprice. The only disadvantage is the psychology of the markets because of the incredible growth and the fear for a rise in intrest rates makes the traders get nervous.

In the United States the following stocks are very promising J.P. Morgan, American Express and Citicorp in the financial sector, Sprint, GTE and Southwestern Bell in the telecommunications sector, Intel, Compaq and Dell in the IT branche, Sears and Kroger in the retail business and pharmaceutical companies like Merck & Co, Pfizer and Eli Lily.

Nikkei is also listing some companies which will show a good performance. These companies are largely aimed at the export market and take advantage from the rising value of the US dollar. Electronic gigants like Sony and NEC, conglomerates like Mitsubishi and the car producer Toyota.

The companies which will show a good performance in the UK are British Aerospace, Britsh Airways, SmithKline-Beecham and BP. But hte British market is volatile because of the possible rise of the intrest rate.

The German markets are also in a winning mood. Even when the growth of the economy is disappointing a number companies still see a chance to make some money. Especially the international oriënted companies like BMW, Daimler Benz, MAN, Siemens, Hoechst Marion Roussel, Bayer, Allianz and the Dresdner Bank and a number of smaller socalled Ländesbanken.

There is in general a positive trend visible in the stock markets of the world, especially if the whole year is taken into consideration. The positive economic development, the low inflation and the abundance of available capital are a nearly garantee for growth.

Israel versus Syria.

After the Israeli elections from last year the peace process nearly collapsed because the Likud party with their right wing coalition were opposed towards the land for peace agreements of the former government. It took time, pressure and a new conference and following treaty start up the process again. But the newly elected government got a more favourable deal from the Palestinians.

The negotiations with Syria came to a virtual standstill, the land for peace deal was unacceptable for Netanyahu government. The Syrians should according Netanyahu first sign a peace treaty or at least disarm the Hezbollah in Lebanon as a sign of good will before there could be any further negotiations over the withdrawal from the Golan heights.

This kind of diplomacy worked well with the Palestinians who had no other option than to find some sort of agreement with Israel. The Palestinians had to save their new established area of control and to do this they need the help of Israel. The Syrians on the contrary want the Golan back but they are not in the same need as the Palestinians to get what they want. They have time on their side.

The recent rumours of a possible war between the two is according our analysis unlikely, even when the Syrians have moved troops, formerly stationed around Beirouth, more to the south closer to Israel. These troops are hardly capable, according their structure and training history, to launch an assault on Israel. They are only there, in cooperation with the Hezbollah in Lebanon, to put pressure on Israel to force them back to the conference table.

The Israeli defence forces are far superior to the Syrian forces, all military forces of all Israeli neighbours combined are not enough to break the Israeli hegemony, the Syrian military forces have lost the support of Russia and all aquisitions new and spare parts have to be financed by hard currency and against market prices.

The inventory of the Syrian armed forces is largely outdated, the training of the forces is lagging behind in mobile warfare, to much time is spend on internal security, and in case of any conflict the Syrian forces are not able to support themselves, they are in need of foreign supplies of spare parts, ammunition etc. they simply can not afford a war with Israel which takes longer than a couple of weeks.

The Israeli forces are also not able to wage a long war but considerably longer than their opponents can. The military hardware is in very good condition and regularly supplied with new high tech equipment. And most of the used hardware, can be supplied and taken care of by their own industry. And finally the training of the Israeli forces is superbe, it is even better now the military is less involved in policing and guarding the West bank and the Gaza strip.

The Syrians in cooperation with the Hezbollah can try to pull the Israelis into actions which force the Israelis to expose themselves without a chance to clearly beat one of the two parties. On the battlefield the Syrians do not stand a chance but they can “easily” gain a political victory. In the end, this can be more beneficiary to get what you want.

The Israelis on the other side maybe want to frustrate the peace process to a certain extent, they want to gain as much as possible without giving up to much territory. A lot of the actions undertaken by the government is giving prove to this hypothesis.

A lot of promises have been made by the Israeli government but most of them are ignored or delayed. Any start to new negotiations are frustrated by one of the two sides before they get a chance to take off. The Israeli forces and the Mossad, the intelligence service, continue with their operations in Lebanon and abroad, and not only terrorists are the target of those operations. Especially the timing of the publication of those operations reveals a process of destabilising the negotiations.

This policy of brinkmanship have been very profitable for the Netanyahu government but it certainly has its limits. The international community get fed up with the delaying strategies, they want a firm commitment that the peace process is implemented as agreed to into the several contracts.

The margins to act get lesser for Israel, their best chance is to avoid any open conflict with the Syrians or the Hezbollah, military they can win but politically they can only loose. The Hezbollah has to be countered with defensive means, intelligence and covert strikes with the garantee that no civilians get hurt. They even could consider withdrawing from the security zone and force Lebanon to an agreement. The Israeli forces can easily protect and control the border of Israel with UAV’s, radar and infra red/optronic sensors. The security zone is a nice to have but not a necessity to garantee the security of Israel.

At the same time this would give Israel some time to handle Syria on their terms instead of being forced to negotiations in which you only have to give in.

Standaard
February 1997

February 1997

February 1997

The end of the Cold War promised to bring a new era of peace and progress for humanity. The contrary happened for large groups of the human society.

The demise of the Sovjet Union should have brought a peace dividend, which actually happened for the industrialised countries, but for a great number of countries it meant the outbreak of inter-state and intra-state rivalries. The conflicts where of relatively small scale but the large number, the intensity of them and the hate between them made it look very bad.

1997 will show that most of the conflicts which rose out of the demise of the superpower rivalry “are still alive and kicking” and are very difficult to solve.

In this article we will give a global view of a number of areas were conflicts are going on or where there is some tension between states or within states.

Europe

In Europe there is one major conflict between states. And this conflict is born out of an intra-state conflict, namely the dissolution of Yugoslavia. Yugoslavia fell apart through the rivalries about power and economic benefits between the several ethnic populations which lived in former Yugoslavia.

Only the conflict in Bosnia Herzegowina is still more or less going on. The intervention of IFOR and later SFOR stopped the actual war but the ethnic cleansing and the hate between the different people is still present. And if SFOR would leave in the near future it will be very likely that the Serbs, Croats and Muslems are at war again.

All other conflicts in Europe are of a different nature. They are intra-state, the willingness of a people for independence or greater autonomy. The Irish in northern-Ireland want a reunification with the rest of Ireland. The Basks in Spain want an independent state. The Corse in Corsica want a special, privileged, status within France. All those organisations which want to pursue their goals are mostly terrorist in their actions. All those organisations have not be able to get the support of the majority of their own people. The people of those areas would like to be independent or have more autonomy but they are not prepared to use violence. They can live with the situation as it is, it is not that important to them.

The intrest groups, like the IRA and ETA, will continue their fight even when they will never win. Because no side can win in this kind of war.

Africa

The continent experienced an explosion of internal violence after the demise of the superpowers. Old regimes lost their support from one of the two superpowers and the opposition/other clans could rise and try to take over power.

Algeria is struggling with a religious fundamentalistic opposition which is waging war through the use of at least two organisations, FIS and the GIA, to force the ruling government out of power. The religious groups represented through the FIS believe they are right because they won the elections that were cancelled through military and the sitting political elite.

The struggle between the two sides will continue till one of them is to exhausted to go on. Both sides enjoy less and less support from the population because the excessive violence used by both sides to intimidate each other estranged them from the population who suffer mostly from it.

Libya is also experiencing some violent opposition. The ruling of Khadaffi is questioned because the economic situation is deteriorating because of the low oil price but especially through the economic boycot. The opposition is not yet strong enough to eliminate Khadaffi but it is more then a nuisance.

Sudan is essentially a country divided in to two countries. The Islamic north and the Christian/anamist south. The north tries to force the Islam religion to the south to control and dominate the whole country. The northern forces are experiencing heavy opposition from the south. The south even gets support from the north of groups which do not agree with the autoritarian regime of Islamic fundamentalists. Both sides are not strong enough to enforce a solution in the coming months. It will mean a prolongation of the conflict for very long time.

Rwanda/Burundi, these two small states are inhabited by a Hutu majority and a Tutsi minority. The Tutsis dominated in the government and the military and the Hutus in trade and agriculture. This situation lasted till the elections. After that the Hutus achieved power, they used it to eliminate the Tutsi power and later in Rwanda to destroy the Tutsi as a people.

The Tutsis in Rwanda did get support from a Tutsi group which fled outside the country after the Hutus took over control after the elections some years ago. After a very long battle against the Hutu government the Tutsis could achieve a victory. A large number of Hutus fled, afraid of an eventual revenge of the Tutsis. The conflict moved itself to Zaïre.

Zaïre an impoverished country by the ruthless exploitation of its leaders. The Hutus who fled to Zaïre continued their battle against their enemies in Rwanda. At the same time they encouraged ethnic differences between the original Zaïrean people and Tutsis who had moved in several hundred of years ago. After some harassments the Tutsis hit back and with the support of some Zaïrean opposition groups and the Rwanda army they could force the Rwandan Hutus out of Zaïre and they could establish a small state of their own in eastern Zaïre.

The Zaïrean forces which are ill-equipped, badly paid and hardly trained could not pose any danger for the advancing opposition/Tutsi forces. The results of decade long neglection of any state structures becomes clear if you see the actions the “official” government takes to recover the lost territory. The government will not be able to regain power that easily. The conflict promisess to continue for a long time.

The conflict in Somalia is nearly over with the exception of the battle for control of certain parts of the capital and the countryside. But the country is effectively parted in several small holdings were a warlord is in power. And as long this is the accepted modus of operandi, the war will be over.

South America

The wild days of this continent seem to be over, with the exception of Colombia and Peru. These countries still possess some active querilla forces which creates some difficulties for the development process.

Colombia has the biggest problems with handling the internal security threat. About three to four querilla organisations and a number of criminal organisations are trying to undermine the government. The querillas have a political goal and the crmininals just want to do their illegal business. Both groups can easily continue the battle against the government because they are financially well off through the drugs and kidnapping business. The government at the same time is hampered in their actions against the querillas and criminals because of the scandals in which so many politicians are involved.

Peru has minimised the impact of querilla organisations on the society but they still exist. The “shining path” and MRTA organisations are still active, as seen by the operation in the Japanese embassy of the MRTA. Both organisations are difficult to eliminate and will stay dangerous until a political solution is found which is acceptable for all parties. But this maybe impossible, the best course of action is to eliminate their goals by adopting them and thereby to destroy their support and “raison d’etre”.

The Indian sub-continent

The factional wars in Afghanistan seem endless, even when the Taliban in in control of two-thirds of the country, it will have to fight hard to get the last third. The three warlords in the north will stay as long as possible in power and even when they loose they will continue as a querilla force to act against the Taliban. The Taliban will face the biggest problems after an eventual victory because it as always very difficult to keep Afghanistan in one part because the people have bigger loyalty to the clan and tribe than to the nation state.

The government in Sri Lanka has been succesfull in fighting the Tamil Tigers but after the destruction of the Tamil strongholds it will be more difficult to eliminate the small and agile combat units of the Tamils. When the government can not reach a political solution the warwill go on for a very long time.

India and Pakistan both face some internal dissent from several political and ethnic groups but they can more or less control the situation and take care that it will not grow into a conflict.

Asia

In a number of former Sovjet republics, which became independent after the dissolution of the Sovjet Union, is still some fighting going on over who is in control and what are the exact boundaries. An example of the last one Armenia and Azerbaïdjan about the enclave Nagorno-Karabach. This conflict is now at a standstill because of an armistice but the fighting will start again if the Azeris feel strong enough to eject the claims of the Armenians in the enclave.

An example of the former is Kyrgyristan and Taïjikistan, several parties are waging war about who will govern the country. And because of the shifting alliances no party is strong enough to alter the status quo. Especially as long as Russia is only interested in keeping the fundamentalistic influences out its sphere of influence.

China has also a number internal problems with groups who want to be separated from China. The people of Tibet and Xinjiang both want their independence. The Tibetians act mostly with peacefull means and by the use of the Dalai Lama get very easy an entrance to all international news agencies.

The people of Xinjiang, they are of Turkish stock and related with the people of the bordering countries, are more and more willing to use violence to stop the Chinese influence. In the long run this could mean that China is going to loose an important part of its territory, the part with a lot of minerals and raw materials. The Chinese can only stop the independence movement by violence and mass immigration of Han- Chinese but this will mean even more violence.

The third problem is based on the inequal development of the economy. The coastal regions are getting wealthy and more independent and the inner regions stay behind. The same is true for the people some enjoy the modernisation and get wealthy but the most of the people get relatively only poorer.

Beside the internal problems which China faces, there are also a few potential external problems. First, the now apparently solved problems with India, the border problem is now more or less solved but the new Chinese naval base and the increasing operations of the Chinese navy in the Indian Ocean is not really a act of good neighbourhood.

Secondly, the Chinese problems with the existence of Taiwan, what they consider as a renegade province. If the economical development of China develop itself better than we expect and China feels strong enough to claim Taiwan with other means then diplomatic or if Taiwan declares itself as an independent state and applies for membership of the U.N., then China will be compelled to use force to take over the island or change the mind of the Taiwanese politicians.

Thirdly, the Spratly Islands which are also claimed by China as a part of their territory. Seven countries have claim on the Spratly Islands and some of them, including China, already deploy forces and/or people on one or more of the many islands. All clashes which happened until now could be de-escalated but in the future with a self-conscious China, as powerhouse or in need, this will be more difficult.

The Middle East

Israel will also be 1997 the attraction of the world press, the implementation of the peace accords with now and then a terrorist assault will stress the relation between the Israel, Palestine, Jordan and Egypt to the utmost.

The relation with Syria and Lebanon is more difficult to classify. A war between between them is unlikely, the superiority of Israel is still to big to overcome for Syria. But the tension between them can rise to unacceptable levels because Syria will let the Hezbollah fight a proxy war. The terrorist threat is very difficult to counter especially if the Hezbollah attacks are limited to military targets.

Israel can not easily give up the Golan heights but the absence of peace treaty will push Israel into a corner were it will loose the international support it uses to have. A wise peace which does not sacrifice Israeli security needs is also absolutely necessary.

Finally the conflict which goes on for decades, the Kurdish question. The Kurds are fighting for their own state for several years but they never came any further than autonomy in Iraq. And that was only reached when Iraq was in great difficulties. The goal of one Kurdistan is an illusion because the three countries with sizeable numbers of Kurds, Turkey, Iraq and Iran, will never allow them to unite. And even the Kurds in the different countries and the several clans/parties in a country will never be able to work or live together. See the autonomy of the Kurds in Iraq who were trying everything to eliminate eachother.

The several Kurdish parties wil continue their struggle for independence and the nations who are invloved will continue to combat them and to play out the several parties against eachother. For the Kurds it is a fight with no hope to succeed.

 

Standaard
January 1997

January 1997

January 1997

A new year offers new chances for business and national and international political developments. But as we look to the year it seems more likely that we may get to much of it all. It will be the year of volatility.

Financial review

The United States of America

1996 was the year of unimaginable growth in the stock markets. The Dow Jones Industrials reached the 6000 mark even before the end of the year. We even might suggest that the 7000 mark is within reach in the first quarter of 1997.

The U.S. economy is looking very good, the growth in profits will not be that good as they were in 1996 but there is still growth potential. The economies of Europe, Asia and the emerging countries are also still on the growing cycle, or they will get off in 1997. But more important there is an abundance of capital which has to be invested somewhere and the psychology of the market and traders is still positive even when there are sometimes stories about a correction.

On the other side the inflation is negligible, the growth of the economy is stable and the value of the leading currencies is in accordance with their economic strength.

In the end the story about stocks will be positive even when there will be a correction of 10 %. Which will probably happen in May/June or in the fourth quarter in October. After the correction the stocks will make up the losses within one or two months.

The stocks at the several U.S. stock markets are getting a little expensive but there are still some companies which promise impressive potential in 1997. The companies with the best potential are in the finance, tele-communications, pharmaceutical, aerospace, oil/energy, IT and bio-technology branches and some retail chains.

Western Europe

The European stock markets will follow the U.S. lead in the bull market. The European markets will possibly get an extra boost if the national governments can keep their spending under control which will be to the benefit of the EMU and this will be good for the growth of all economies. The outperformers of the European markets will be the automotive, oil/energy, pharmaceutical, retail and food and beverage branches and some banking/insurance houses.

Asia

The Asian area has to be divided into at least three groups if we consider the most important countries and markets. First, Japan, the Japanese economy will show some growth in 1997. But the internal situation is still very complicated and full of problems. The branches who will show a good performance in 1997 will be the companies which are heavily involved in the export market, like the automotive and electronics industries. Where as the finance industry is still in very bad shape and will first show improvement if the bad loans of the eighties are written off and the finance houses restructured.

The second group are Asian tigers, like Korea, Taiwan and Singapore. The economic growth of these countries have been less then a decade ago. It will show if they can cope with this situation which is more familiar to the economic situation of the socalled first world. The resource mobilisation plan has to be replaced with a invention-technology plan. But for the coming year the economies and the associated stock markets of the Tiger countries will continue to grow. A diversified portfolio in the leading conglomerates and technology based companies is highly recommmendable.

The third group of companies are the want to be Tiger countries of Asia, like Thailand, Indonesia, Malaysia, the Philippines and even China. These countries showed some impressive growth figures in 1996. But the most advanced of these countries, Thailand, was growing lesser then expected. The investments into Thailand declined also. The infra-structure and national economy are run into disarray. If Thailand does not take appropriate measurements to solve them they will run into even more difficulties. Investments into Thailand should be avoided.

Indonesia is a little better, but the national laws and even more important, the racial problems and the large inequalities between the wealthy and the poor, can create a situation where investments could vaporize very quickly. But for the risk-loving investor there are some interesting companies which will show some exceptional growth in 1997.

Malaysia and the Philippines are the most promising of this group. The economies of those countries show a respectable growth figure and they have not reached yet the development of the Tiger countries. The finance, export-consumer products, low-technology IT and tourist industry should promise the best profit chances.

And finally China. China the country with the most promising market will show to be a bubble. The industry is still highly inefficient and has produced the last two years witout making any significant sales. The big difference between development in the coastal regions and the the more inside regions, inflation, corruption, the growing number unemployed and the inefficient state-system will destroy any improvements which are made by the few succesfull companies. And China still has some large problems with the Tibetian and Turkish/Islamic peoples which live in the far west of China. All those factors combined mean uncertainty about the future and a brake on development, which are both bad for the stock market.

The only way to make some profits in China is through direct investments or joint ventures to take advantage from the very low wages and to stay far away from the independence movement in the west of China.

Eastern Europe

The emerging markets from Eastern Europe, Russia and South America. The emerging market will continue to attract the intrest of the investment manager / investor. The markets still promise a large potential for profits. The prices of a lot of stocks are still undervalued, but be carefull there are a lot of bad stocks around.

In Eastern Europe, the Polish, Chech, Hungarian and to lesser extent the Baltic stock markets look very promising. The economy of those countries are fully recovering from the socialist adventures. A lot of companies are privatised, the countries are attracting foreign investments, the markets are not yet spoiled with products and the people are strongly in favour to be connected with western Europe, which garantees the continuation of the development process.

The most interesting branches will be the car/automotive, energy, construction, communication and the retail market.

Russia

Russia on the other hand could become the biggest prize, but a lot of problems have to be overcome to reach that. The internal structures of the state and most of the companies is still underdeveloped to western standards. While at the same time the purchasing power of the average Russian has not increased where by the sales and growth of the Russian companies have lagged behind. The strength of the Russian state has also diminished because of the inefficïent tax system. Wages and pensions could not be paid and necessary purchases could not be made.

To solve all these problems will take time but eventually it can be done. None the less all these difficulties, investments into the listed energy, mineral trading companies, technology research houses, and special steel/metallurgy manufacturers could be a profitable case.

South America

The situation in South America is looking much better. The best performing markets are those of Argentina, Brazil, Chile and Mexico. Those countries have more or less there spending and inflation under control. The economy showed in the last years a steady growth and investments into the American “tigers” proved to be profitable. There is still enough potential for the coming years. The electronics, construction, tele-communications, energy and retail branches will show some exceptionnel growth this year.

The other South American states like Peru, Venezuela and Ecuador lag behind in the development and growth of their national economies. All those states have internal problems from querilla/terrorist activities to inflation and lack of investment opportunities. Because of the internal problems the countries are seen as “banana-republics” which is not beneficiary to attract foreign investments.

India

Other countries where investments might be interesting are India and South Africa. India still has a lot of problems which are originated out of their own peculiar economic system. But they are slowly improving it. The advantages of India is in their people and their education system. A few of the large conglomerates and a number of software development companies offer a very good return on your investments. But the government of India has to stimulate the economy by improving its infra-structure, education for all, creating a better law system and keeping down ethnic violence.

South Africa

South Africa is also offering some very good investment possibilities. Even when South Africa is struglling with high unemployment and high inflation its economy is growing. And because of the growing home market and world economy there is still a lot of growth potential. The economy is already very well developed which makes the improvement of the economy easier with a near garantee for success. The finance, construction, technology and mineral extraction and process industry industries are the most promising for 1997.

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Workshop: Conflict – Vrede – Veiligheid

IN-SE Services

Naast onze activiteiten als bedrijfs-, management- en organisatie adviseurs zijn wij bovenal gespecialiseerd in conflict, veiligheid, risico- en stabiliteit analyses. Graag willen wij onze kennis delen en u d.m.v. lezingen en/of workshops introduceren en deel genoot maken in en van de spannende wereld van internationale politiek, conflicten en terrorisme.

De lezingen en workshops zijn voor zowel personen als bedrijven. Ter intellectuele ontwikkeling of om bedrijven, personeel, beter bewust te maken van de actuele situatie, de risico’s en de mogelijkheden in de wereld.

Voor meer informatie over een lezing of workshop, algemeen of individueel ontwikkelt om tegemoet te komen aan uw wensen en verwachtingen, kunt u contact opnemen via de mail:

INSEservices@gmail.com

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Intelligence – Security

Veiligheid, een belangrijk element om goed te kunnen leven, werken en investeren. Zonder veiligheid is dit haast niet mogelijk. U heeft waarschijnlijk al maatregelen getroffen om de veiligheid te waarborgen, in eigen beheer of ingehuurd. Hierbij moet dan de vraag worden gesteld naar de effectiviteit van de beveiliging. Vertrouwen op een portier, antivirusprogramma en het nachtelijke rondje van het beveiligingsbedrijf is heden ten dage niet meer voldoende.

Veiligheid, beveiliging, is een soort levende organisme welke continu moet worden geëvalueerd, aangepast en gecontroleerd om effectief te zijn en te blijven.

Wij zijn gespecialiseerd in het onderzoeken, evalueren en controleren van de veiligheid-, bedreigingssituatie en beveiligingsprocessen en methoden. Kunnen u adviseren om een veilige situatie te creëren, te handhaven en te verbeteren.

Wij zijn actief met onderzoek naar, advisering bij en verbetering van:

–       persoons- en object beveiliging;

–       ICT beveiliging;

–       beveiliging van intellectuele eigendom;

–       en de veiligheid  van (internationale) verkoopmarkten, vestigingen en investeringen.

Wij zijn niet verbonden aan een beveiligingsbedrijf, zijn geheel onafhankelijk en alleen gericht op het verbeteren van de veiligheid en de best haalbare kosten-efficiëntie.

Zonder een betrouwbare evaluatie, onderzoek, naar de effectiviteit van uw beveiliging loopt u eigenlijk achter de feiten aan en kunnen daadwerkelijke en virtuele indringers op alle fronten bij u binnen komen. Dit kan niet alleen ten kosten gaan van eigendommen maar ook ten kosten van lijf en leden.

Wilt u veilig leven en werken dan is de evaluatie en controle van uw veiligheidssituatie absoluut noodzakelijk.

Met een veiligheidsscan kunnen wij uw situatie evalueren en adviseren hoe te anticiperen op de bestaande situatie. Een kleine investering met een grote opbrengst, veiligheid voor lijf en leden en uw eigendom.

In een persoonlijk gesprek kunnen wij de omvang van het onderzoek/evaluatie vaststellen, wie-wat-waar onderzocht moet worden, wat noodzakelijk is en wat optioneel en wat de kosten zijn. Gezien de voordelen van een veilige leef-werk situatie zijn deze bescheiden en in ieder geval meer dan het dubbele waard.

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