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Bottom Line: Tsunami investing

By
GREGORY FOSSEDAL, UPI Business Correspondent

SALT LAKE CITY, Jan. 8 (UPI) -- To the old investment saw, "buy when there's blood in the streets," one might add, "or a tidal wave."

One cannot write about the recent Asian Tsunami disaster without pausing to grieve for its human toll -- hundreds of thousands likely to be dead when all is told; more than 5 million homeless -- and pray for the victims and survivors. This being said, the disaster brings with it opportunities, particularly for countries with the political skill to recover from the disaster and even rise from it.

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From the Japanese and German revival after crushing defeat in World War II to the U.S. rally in the months after 9/11, or the post-SARS virus recovery, disasters can be the springboard to resurgence -- even help bring about needed reforms. Disasters clean out bad or old infrastructure, and bring aid that can modernize and even improve the old.

Stock markets in Thailand, Malaysia, and other tsunami victims are, indeed, already up several percentage points since Dec. 26 -- the lone exception being India. Of all the countries that have suffered, however, Indonesia certainly tops the list. It's also the country that is receiving the most generous outpouring of aid, as in Australia's dramatic $1 billion pledge, and which has the political economy most in need of restructuring even before the disaster -- hence the most potential for bold political strokes.

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President Susilo Bambang Yudhoyono, a former general with a fresh electoral mandate only a few months old, was already off to a good start as president.

He now appears to be reacting most swiftly (admittedly, with the greatest need) to the need for relief and restructuring. Mobile telephone service is already restored in the most hard-hit province. Second-wave impacts, such as widespread hunger or disease, appear to have been headed off at the pass.

Yudhoyono has also emerged as something of the first equals in the leadership of the suffering countries. His call for relief to be directed by the United Nations was not only smart policy, but good regional and international politics. Someone has to be in charge.

The Tsunami could prove to be for Yudhoyono what 9/11 was for George Bush in America -- a tragedy that at once forces and enables him to elevate his leadership and become a national, an in his case regional, statesman of the first order.

There are always risks. One would be if the Tsunami becomes an excuse for weak economic performance. Another: The disaster could cause Yudhoyono to defer good decisions, such as the administration's reduction in oil price subsidies.

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So far there are no signs of a policy-reform pullback. If anything, Yudhoyono appears to be preparing to use the Tsunami as yet another reason why Indonesia must improve incentives for workers, respect for law, and transparency for international investors.

In the tragedy's first hours and days, anyway, Indonesia's new president appeared capable and confident -- and it's the first hours and days, after all, that are most telling in a crisis.

Bottom line: Our clients began reinvesting in Indonesia early this year, and still like the market at this level. The outlook for Thailand, Malaysia, and others in the region is also positive, but Indonesia will benefit from the most aid, has the greatest potential upside from infrastructure aid, and has in Susilo one of the world's most skilled economic and diplomatic leaders. Still in.

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Gregory Fossedal is an advisor on emerging markets and geopolitical risk to international investors, and a research fellow at the Alexis de Tocqueville Institution. His clients may (and usually do) hold long and short positions in many of the investment securities and opportunities mentioned in his reports. "The bottom line" is compiled from sources we believe to be reliable, but no representation is made that they are necessarily accurate or complete. Investors should perform their own due diligence and consult their own professional advisor before buying or selling any securities. Mr. Fossedal's opinions are entirely his own, and are not necessarily those of his clients, UPI or AdTI. Furthermore, they are subject to change without notice.

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