More U.S. Stocks Fall Prey to Asian Currency Concerns

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The financial typhoon in Asia claimed more victims Friday.

Citing expectations of a shrinking share of the Asia market,

Smith Barney

analyst Holly Becker slashed her recommendations on

Procter & Gamble

(PG) - Get Report

,

Colgate-Palmolive

(CL) - Get Report

,

Gillette

(G) - Get Report

and

Avon

(AVP) - Get Report

.

The cuts took their toll. Procter & Gamble's slide -- it dropped 3 1/4 to 133 3/8 -- accounted for more than a quarter of the

Dow's

44.83-point drop. Of the pack, only Colgate managed to eke out a gain, rising 5/16 to 66.

The downgrades followed similar moves Thursday, also from a Smith Barney analyst, on

Caterpillar

(CAT) - Get Report

,

Deere

(DE) - Get Report

and several other heavy equipment manufacturers spurred by concerns the slumping Southeast Asian currencies will make American exports prohibitively expensive.

The motivation for Friday's downgrades was the same. As currencies like Thailand's baht, which has lost nearly half its value against the dollar since the beginning of July, extend their slides, the cost of American exports becomes too onerous for companies in the region.

Because almost all international trade is conducted in dollars, Southeast Asian companies have to pony up more of their local cash when making overseas purchases. How much more? About 25% more for Indonesians; 23% more for Filipinos; and 20% more for Malaysians.

How much further the debacle will affect the U.S. market is anyone's guess.

"Obviously, if we were to see a slowdown in the economies of the whole region, we would see slower trade and exports," says Peter Cardillo, director of research at

Westfalia Investments

. "Remember that the Asians are big importers of U.S. technology."

Cardillo, however, believes the region's current turmoil hasn't been significant enough to bruise the U.S. market yet, regardless of the downgrades.

Douglas Johnson, the international strategist at

Merrill Lynch

, concurs, saying the region's troubles are a convenient trigger for re-examining the prospects of American companies. "We've gotten very spoiled in the U.S.," he says. "Earnings momentum has been very strong."

Maybe. But as Asia continues to convulse, expect more fallout. In the U.S.

This story was originally published on Sept. 5, 1997.