|
Teamwork versus panic
|
 |
October 28, 1997: 4:20 p.m. ET
Hormats says Hong Kong needs global help to get its house in order
|
NEW YORK (CNNfn) - On Tuesday, Robert Hormats, a vice chairman at Goldman Sachs, told CNNfn anchor John Metaxas how long he thinks the market sell-off will last. A transcript of that Business Day interview follows.
JOHN METAXAS: Before all of this selling across the world stops, does Hong Kong have to get its house in order, and what will that take?
ROBERT HORMATS: Well, Hong Kong really has to get its house in order. And in large measure, Hong Kong's house is in order. I think there has been this concern that there are higher interest rates which will slow growth and concern about the stability of the Hong Kong dollar. I don't think Hong Kong will devalue or let the Hong Kong dollar depreciate. But I think it's important that there be strong support from the U.S., from Japan and from China. And China, I think, is supporting it.
METAXAS: We hear some of the European foreign ministers this morning calling for a coordinated international effort. What exactly does that mean? What can world governments do about this?
HORMATS: Well, I think the coordinated effort really has to focus primarily on Southeast Asia. That's where these problems and the instability began to emanate from several months ago. And I think what's needed is a very clear IMF program in these countries in Southeast Asia to stabilize their economies and improve regulation of banking, and that means leadership. It means leadership by the IMF, but particularly Japan, as the regional leader, is going to have to step up to the plate and do more. And the U.S. is going to have to be seen to be working with them and not fighting over maritime and other issues with them.
METAXAS: You're really talking about loans and pumping money in.
HORMATS: I'm talking about, first and foremost, a clear adjustment program a la Mexico. Mexico started with a strong program, and with a strong program it got support from the United States and the international community. These countries [of Southeast Asia] need strong programs themselves, cleared by and supported by the IMF -- credible programs that they have to demonstrate that they're actually going to implement, not just talk about. And then the international community -- Japan, the U.S. and others -- should come in and that will help stabilize things. It's not the answer, but it's one part of the answer.
METAXAS: All right, let's talk about the U.S. market, if we can. Is this purely a Hong Kong flu here in the U.S. or is there a deeper malady?
HORMATS: I think it's really a Southeast Asia-Hong Kong flu. There are other issues that have come up over the last couple of weeks, but I think the negative psychology seems to come from Asia. And let's also face it, Japan is emanating some negative psychology, too, because its economy is in trouble. It has to deal with that.
But I think the U.S. economy is fundamentally in very good shape. Abby Cohen of Goldman Sachs has made the point repeatedly, and I think quite correctly, that the fundamentals of this economy are good. Bob Rubin's made the same point. And I think that, over time, that's what will dominate thinking about the market here, today or tomorrow.
METAXAS: But markets do not run only on fundamentals. They run on the value of the stocks on the market and on sentiment. And, by perceptions, the sentiment is negative and the value has been too high. Are the fundamentals enough to let the markets recover here in the U.S.?
HORMATS: I think the fundamentals are enough. Who knows when they're going to start recovering? I tend to think it won't take too long.
But you're right, the psychology is bad. It started in Asia. It picked up here. Now it's in Europe and all over the world. And you've really got to deal with it piece by piece. The U.S. is the strongest piece in the overall equation, the best economy in the world, and I think the improvement in psychology will probably start here. But you also have to deal with the other negative psychological and economic impact of Asia, and that requires a lot more work by the major players in the community.
METAXAS: We heard your former colleague Robert Rubin say the economy is sound. He's now Treasury Secretary. Can the administration do or say anything more than it has been doing to give confidence back to the markets?
HORMATS: I think with respect to the U.S., it's doing the right thing. It's underscoring that this market will respond ultimately to fundamentals. The fundamentals are good. They're the best they have been in 30 or 40 years here. There's no reason for this market to be negative. American companies have done a lot of restructuring. They're very competitive. I think, though, that what the U.S. does need to do is work with the Japanese and the IMF on the Asian problem, and Japan really has to play a greater role. That nexus, that part of the equation, still needs to be addressed.
METAXAS: And with the president of China here right now on a visit, coincidentally, can anything come of that visit to stop the crisis in Hong Kong?
HORMATS: I'm glad you raised that, because it does demonstrate that we've got to work with China. At this point, China's not a major financial player, but they're becoming so. They're a major trading player, and I think it would help psychologically to demonstrate that this meeting does lead to improved economic ties between China and the U.S. -- not so much for today or tomorrow, but over the long term for economic and political stability.
METAXAS: President Jiang is supposed to tour the stock exchange.
HORMATS: Absolutely. When he sees the unstable markets, and he's got them in his own country, he'll understand.
METAXAS: Kind of ironic. Robert Hormats of Goldman Sachs, thanks very much for joining us, as always.
HORMATS: Thank you. 
|
|
|
|
|
|
World Markets
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
