Who’s Got The Jumper Cable?

The slowdown has intensified competition across all sectors. In China and India, for example, global carmakers Ford, Toyota and others are slugging it out with tough local brands like China's Geely and India's Tata in the critical entry-level category notorious for thin margins. Ford cut the price of its midsize in China last week, a move analysts expect rivals Toyota, GM and others to follow. In China's real-estate market, "price competition is unavoidable" nationwide, as rival developers compete to trim inventories as large as 27 months in some cities, concluded Beijing Gao Hua Securities in August. Last week the country's largest listed developer, China Vanke, said its sales dropped 35 percent in August from a year earlier. Its share price peaked above 25 yuan per share last November and now trades below six.

Financiers are trying to put on a good face despite all the bad news. Hugh Young, managing director of Aberdeen Asset Management Asia, says there are many Asian companies with strong balance sheets that he expects "to grow their businesses over the next year, though you won't see it in earnings given the tough environment." Tony Fernandes hopes his budget airline is one of those. HSBC is doubtful. "We see the only effective response [to higher fuel costs] as raising prices and cutting capacity," it noted in a July report, then forecast that the "cyclical gloom" that now besets the industry would favor airlines with global reach, brand power and strong balance sheets. Companies on that list include Singapore Airlines and Cathay Pacific, but not AirAsia. Fernandes's dream, like others in Asia, could very well end in a rude awakening.

With Sonia Kolesnikov-Jessop in Singapore

© 2008