Asia offers cushion for businesses while US crisis likely to worsen

By Victoria Jen, Channel NewsAsia | Posted: 09 September 2008 2302 hrs

SINGAPORE: Despite the recent relief following the US government's bailout of mortgage giants Fannie Mae and Freddie Mac, some business leaders still fear the worst is yet to come.

Speaking at the Forbes Global CEO Conference on Tuesday, they said the current difficult period is also set against Asia's growing domestic demand and under-leveraged financial markets. These can cushion the current downturn and offer opportunities.

Stock markets may have received a temporary boost from the bailout of Fannie and Freddie, but a top business leader warns the United States housing crisis is likely to get worse with more defaults from leveraged buyouts.

Richard F Chandler, chairman, Orient Global Holdings, said: "I would guess if the debt gets re-priced in the weak global environment, we are going to see more defaults, and those defaults are going to be in the same companies that are writing off the mortgage defaults today."

While it may take years for the US economy to recover from the crisis, Asia on the other hand has grown stronger from the financial crisis in 1997.

Businesses are being urged to look for opportunities in Asia, especially as the region is catching up with the US in almost every respect.

John S Chen, chairman, Sybase Inc, said: "What we are seeing is a GDP reshuffling around the world, around sector rotations and around geographic location."

However, oil costs may still pose a threat, with some businessmen expecting prices to top US$200 a barrel in two or three years. - CNA/vm