Although Citigroup Asset Management believes the global economic slowdown is coming to an end, Anthony Muh, regional head of investment, says a full recovery is unlikely until the first quarter of next year.

"Recovery will not come in a U or a V or an L shape but in the shape of a teapot," he says, brandishing the image of a teapot with its spout half-way up one side, and economic growth in the direction of water pouring into the pot's lid and then rushing back up the spout. "Recovery will not reach the same point because global economic growth had been above traditional growth rate trends," he explains.

The firm's caution rests on still-high inventory levels, little to no capital expenditure, continuing lay offs and remaining spare capacity, especially in Japan. Japan itself remains unable to act as a growth locomotive, given its high non-performing asset levels, debt overhang and potentially explosive unemployment rates if restructuring were taken to its logical outcome. No quick fixes exist for such problems.

Nor is continental Europe ready to take over America's role as the driver of global economic growth -- such expectations, expressed over the past year or so, have been disappointed. Europe's locomotive has slammed into the tech crash, and further dragged down by oil prices and the European Central Bank's out-of-step slowness to cut interest rates.

"Once again the United States will perform better, relatively speaking," Muh says.

Despite the gloom, Muh says monetary policies are providing glimmers of hope. Aside from the ECB, the other major economies -- the US, Britain and Japan -- have aggressively loosened monetary policy. He also notes while the latest quarterly macroeconomic numbers are grim, they also tend to lag what is happening now, so he believes we are now turning a corner.

Nonetheless for Asia there is little to be enthusiastic about. Citigroup Asset Management is neutral on Hong Kong and Taiwan. It is upgrading Singapore to neutral from underweight, but it has just downgraded China to neutral from overweight. It is all decidedly ho-hum (although he remains overweight India, mainly because its software industry is benefiting as the rest of the cost-conscious world outsources).

Muh puts the blame on the semiconductor downturn. "We don't buy into the consensus predicting a revival," he says. "Any growth will come at the earliest in the first quarter of 2002." IT demand will, if anything, fall further. He notes this downturn is different than its predecessors because the last boom was fuelled by demand for mobile telephones and 3G dreams. Now telecom companies have no money to invest in 3G, and the marginal differences in upgrades are not great enough to stimulate consumers to replace their phones. He believes chip makers such as TSMC and UMC are running at below 40% of their capacity, and probably losing money; at the same time mainland China is increasing its capacity.

IT is not the only no-show for stimulating growth in Asia. Construction is inactive, consumer spending is falling as lay offs spread. North Asian economies are, however, pursuing loose monetary policies, which suggests to Muh that a turnaround could be cooking. Beyond that, "China is the only positive story". China aside, Muh believes the advanced markets in Asia won't grow much more than 3% -- again, pretty pedestrian stuff.

China is of course a fantastic growth story, but Muh is not getting carried away. He notes there is one black spot, and that is the screeching halt to its growing current account. In 2000, China enjoyed an 11% current account surplus, which will fall to 5% this year and 2% next year. It is not yet clear to what degree exports act as a stimulant on the domestic economy, and Muh remains agnostic on the question, but this could -- could -- endanger the growth story for the medium term.

Broadly, he says: "Until earnings stabilize, a return to fair value is difficult to achieve. This is a bottom-up or industry investment environment, not a top-down one."