Reports of the deflationary effects of Asia’s economic crisis on corporate growth have been much exaggerated according to Morgan Stanley Dean Witter’s chief economist Stephan Roach. It is my distinct belief that the linkages between Asia and the rest of the world are far more limited than you have been led believe, said Roach in comments to institutional investors in the US. Not that these comments will have much impact on Wall Street, where investors have little patience with Asia-related excuses when it comes to earnings shortfalls. Market turbulence, in Morgan Stanley’s view, is set to reduce US Gross Domestic Product growth by just a quarter of one percent, and financial markets have apparently been premature in their assessment of the deflationary shock to the global economy. So next time you hear another CEO bleating about profits ravaged by Asia’s turmoil, perhaps you should be reading between the lines.
