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How the Asian financial crisis led to today’s debt binge

Former hedge fund analyst Steve Clapham on how today's problems were sown in Asia in the 1990s
How the Asian financial crisis led to today’s debt binge

I haven’t been writing for Investors' Chronicle for very long so to say it’s unusual to be reviewing a book would probably be a more accurate description in a year’s time (assuming I last that long). But I wanted to tell you about a book by my friend Russell Napier because its conclusions are important. I expect the book, The Asian Financial Crisis 1995–98: Birth of the Age of Debt, will appeal only to a minority of readers – it’s a serious book, weighing in at nearly 400 pages – but it’s a fascinating read for those interested in financial history (and all investors should be interested, because market cycles tend to repeat).

The book is framed around Napier’s contemporaneous writings as the Asian strategist for then top Asian broking firm CLSA. This was an unusual brokerage because for many years it acted as a pure research firm, without the bulge banks’ conflicts of interest: it had no corporate finance arm, no market makers and purely sought to help its end investment clients. Because of the lack of conflicts, its analysts were free, and were encouraged, to speak their minds.

This sometimes resulted in two analysts/economists from the firm coming up with different conclusions from the same data – I watched its economist and strategist at a conference presentation and was a little bemused; with one expecting the dollar to strengthen and the other suggesting it would weaken, it meant that one of them was bound to be right.

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