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1998-05-18 08:33:24


Stock Market Woes in 1999, Predicts Dutch Banker



A Dutch investment banker has warned of a bad year for stocks in 1999.

This is a happy-face story. The recommemded investment strategy is a shift to bonds, then back to stocks. Most banks will make it, except in Asia. (Asia. Japan. Banks. Hmmmm.) There will be a little inflation. There will be a few bankruptcies. But there will be winners.

Meanwhile, we await the report of the first major money center bank anywhere on earth to reach compliance, or the first civil government above the county, or the first telecommunications firm, or the first electrical power generation plant, etc., etc.

Denial. The world is stoned on denial.

This is a Reuters report on C/NET (May 15).

* * * * * * * *

AMSTERDAM--The millennium bug is expected to put a brake on the global economy, with stock markets feeling the shock from 1999 onwards, researchers at Dutch financial group ING Barings said today.

"We want to be sure that everybody gets convinced of this matter, without causing any panic," ING Barings chief strategist Philip Menco told a news conference. . . .

"Worldwide trade will fall [due to the millennium bug] and so will Dutch exports," he said.

ING is advising its investors to start overweighing bonds in their investment portfolios and underweighing stocks from 1999 in view of the millennium bug. Early in 2000, when inflation is expected to start accelerating, investors should reduce the proportion of bonds in favor of stocks.. . .

Menco said a drop in worldwide industrial output seemed unavoidable, and ING Barings foresees some problems in the banking sector.

"Most banks will be millennium-proof, except for some -- think of the Far East," Menco said, warning of a domino effect.

ING Barings also released a study on whether the 51 biggest listed Dutch companies were ready to face the millennium. According to the study, the Netherlands is better prepared than France, Belgium, and Germany, with the Dutch lagging only the United States and Canada.

But the study found 30 percent of the 51 companies were likely to encounter problems in the runup to the millennium.

In the Netherlands, ING Barings expects profit growth of domestic firms surveyed to be reduced by some 5.3 percent in 2000 due to millennium-linked problems. Inflation will be boosted by 0.3 percent, the public deficit by 0.6 percent and national income cut by some 1.1 percent in 2000 compared to normal circumstances, Menco said. Exports are seen down 3.5 percent and imports lagging by 2 percent.

But there will also be winners. Dutch information technology service providers, temporary employment agencies, and consultancy firms should see earnings rise due to the millennium bug. And profit growth would be cut by less than 1 percent in the health sector, among hotels and restaurants, other service-providing companies, and trading firms.


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