STORY:
Fix The Bugs And Prepare For Y2K Fears

Merrill Lynch survey tells investors to prepare for public Y2k fear reactions

by Elizabeth Scott

(Everything2000.com) - Reaction to computer Y2K related fears may be presenting investors with more headaches than actual computer problems according to a recently released Merrill Lynch Global Research Survey "Y2K: Bulls, Bears or Bugs?." A summary of the report concludes there are only two Y2K problems; actually fixing systems, and the fear reaction by the public causing disruption to financial institutions.

The report states that investment into new systems to handle Y2K problems should make financial and other institutions more effective and efficient on a global basis. Human reaction to fear is less predictable. According to the report, Merrill Lynch's staff predict a stockpiling of inventories in the final quarter of this year. If this does occur, correspondingly there would be a slowdown of GDP growth in January, February and March in the year 2000.

"As the inevitability of January 1, 2000 draws closer and as media scrutiny focuses on that date, we expect more actual fixing will get done but more anxieties will arise," said Jeanne G. Terrile, director, strategic research for Merrill Lynch.

Fears are likely to be manifest in other ways state industry jeremiahs'. To handle expected currency hoarding, the federal reserve bank is circulating an additional $50 billion. The elderly with fixed incomes are also likely to react with more fear to the coming millennium. The Merrill Lynch report states that creating addition liquidity is a priority for this group of investors.

In contrast to the public, professional investors and fund managers are becoming more relaxed about the Y2K possible negative effects on global economic systems. "Only 35% of those surveyed consider Y2K to be a significant element in stock selection (the number is higher in Asia, lower in the U.S. and UK.)" states the report. Some pundits have renamed it the Millennium shrug, concluding that Y2K fears are few. The Canadians are also moving ahead with Y2K compliance. The report states that "83% of small businesses will be ready by January 1st."

Beyond North America the report claims that in the Asia Pacific, "80% of companies are confident of their own internal compliance. While in Japan, the big change over the past year has been the government's increased efforts to enforce compliance." In Japan and China , Merrill Lynch analysts are voicing a wait and see approach. Australia is planning to close its stock market.

The company's report states "compliance statistics are improving every month in Europe, although some share the universal fear of government and small company problems." Latin American countries are generating a bit more concern to investors according to the report, again, not due to actually Y2K compliance issues but public reactions to fear.

DATE: 07/22/99

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