The central government's 4-trillion-yuan stimulus package may not be enough to prevent Asia from slipping into a recession, said Stephen S Roach, chairman of Morgan Stanley Asia.

During the Asian financial crisis in 1997, and the dot-com bubble burst in 2001, the central government had invested heavily in construction projects to help boost the economy, Roach said yesterday on the sidelines of the Clinton Global Initiative meeting in Hong Kong.

But, as the financial headwind was blowing from the US, a crucial exports market for many Asian economies, it takes time to see the results of the stimulus plan.

Talking about the US economy, Roach said: "When the consumption bubble bursts, that's a big problem for this region."

"There is no country in this region that is not either slowing or in recession right now because the world's biggest market for its exports is in serious trouble."

The financial sector should have learned a lesson from the credit crisis, he said, noting that the authorities will tighten their regulations with greater transparency.

Speaking at the same conference, Avenue Capital's chairman Marc Lasry said he sees a 10 percent chance that the US recession will turn into an outright depression. Compared with other countries that saw a decade of stagnation, however, the US is not likely to suffer a prolonged economic slide, he added.

"The big difference is that the US forced its banks to recognize losses. Banks have not started lending but they will in the first or second quarter. Once lending begins, the consumer will start to come back," he said.

New York-based Avenue Capital, founded in 1995 by Lasry and now one of the world's biggest funds, recently raised $6.1 billion for "special situations" trading strategies.

Lasry also said that financial assets have become so cheap because of the credit crisis that it is a good time to scoop up bargains.

Referring to the investment environment, he said: "We're looking at valuations we think are extremely low. Unless the unthinkable happens, you'll be fine."

(HK Edition 12/04/2008 page2)