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Asian credits - Being rational about recovery

Most Asian economies have in recent months recovered strongly from the 1997 crisis. But there's a distinct lack of irrational exuberance among both borrowers and lenders. The irresponsible big spenders have been cleared away and the best credits don't necessarily want to borrow at all. Banks aren't exactly falling over themselves to lend to responsible corporates that survived the crisis because of their prudence and integrity. But their merits are increasingly being recognized. Peter Lee reports.

Smith: saw good Asian companies hit along with the bad

When the financial crisis broke across Asia in the second half of 1997, the best companies were hit just as hard as the good. It was a shock of such sudden appearance and virulent intensity that no-one could have been prepared for it. "Even the top Hong Kong land companies with very conservative gearing levels of 20% or less and family owners measuring their net worth in billion of dollars - who must have thought that nothing much could harm them and that a crisis might even help the strong companies to stand out - suddenly found that banks simply stopped lending to them. The head offices of many Japanese, European and American banks completely reined in their Asian operations," recalls Alan Smith, vice-chairman of CSFB in Asia. And with the domestic Asian banks drowning in bad debts, the result was a temporary seizure in credit that ushered in two years of panic and confusion. "If you see your net worth fall from $5 billion to $1 billion in a few months, it's easy to imagine your last $1 billion disappearing too," says Smith.

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