--HSBC chief economist says Hong Kong dollar "extremely expensive"
--HSBC chief economist sees yen hitting 120 per euro this year
--HSBC chief economist says yen "won't collapse" vs. USD in 2001
--HSBC chief economist sees '01 Fed rate cuts of at least 150 bps
--HSBC chief economist sees Hong Kong '01 GDP growth down to 3.4%
--HSBC chief economist says rate cuts won't help Hong Kong much
By Michael Gulyaev, BridgeNews
Hong Kong--Jan. 18--The Japanese yen this year will fall by 30% against the euro and hit a level of 120 to the European single currency, Hong Kong Shanghai Banking Corporation's chief economist Geoffrey Barker predicted Thursday at the HSBC Asian Outlook seminar. Barker added that the yen "won't collapse" against the U.S. dollar this year. He also said he expects the U.S. Federal Reserve's interest rate cuts this year would amount to at least 150 basis points.
* * * On the topic of Hong Kong, Barker said that he expects the territory's gross domestic product to grow by only 3.4% this year, down from an estimated 10.0% last year. He was quite bearish about Hong Kong's markets and in general and predicted that the U.S. rate cuts, which will automatically result in similar cuts by Hong Kong banks, would not help the territory very much.
Most analysts, and the Hong Kong government, expect Hong Kong's GDP to grow by somewhere between 4.0% and 5.0% this year. Barker pointed out that his consensus forecast of other analysts' predictions puts this year's GDP growth at 4.3%.
He also said that Hong Kong's exchange rate, fixed at H.K. $7.80 per U.S. $1.00, is "extremely expensive."
"Unlike other Asian countries, Hong Kong does not have the buffer of a cheap exchange rate," he said.
He said that while he expected the U.S interest rate cuts "to be very significant, at least 150 basis points this year," the rate cuts would not mean "we should be optimistic about Hong Kong."
"I think interest rates in Hong Kong are still high and I think we will see liquidity conditions in Hong Kong tightening. We will see cash flows out of the territory," Barker said.
Speaking about the yen he said it was "neither particularly expensive, nor particularly cheap" but Japan would remain "under squeeze and yen will go down further."
"I see 30% devaluation of yen against the euro. But I think this year it will be a euro/yen story, yen will not collapse against the U.S. dollar," he said. End Copyright 2001 Bridge Information Systems Inc. All rights reserved.