<html><base href="http://biz.yahoo.com/"><title>Yahoo - Asia devaluation may leave crater on Wall Street</title><center><table cellpadding=2 cellspacing=0 width="100%"><tr><td width="1%"><a href="http://quote.yahoo.com/?u"><img src="http://us.yimg.com/i/fi/main4.gif" border=0 width=281 height=31 alt="Yahoo! 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It would lose face on the world stage by breaking a pledge and would put pressure on other countries in the region to follow suit.It could also lead to social disruptions as the value of people's savings fell overnight and import inflation pushed prices up.``They don't gain anything. One of China's really important needs is foreign capital. If they devalued the Hong Kong or Chinese currency, it would shut the window to foreign capital,'' Canelo said.Chinese leaders have hinted Beijing's will to resist a devaluation depends on Japan's ability to keep the yen from depreciating further.But on Monday, the dollar came within a hair of its eight-year high against the yen at 146.75, reached on June 16.China stepped into the foreign exchange market Monday to defend its currency, underscoring earlier hints that yen weakness may force Beijing to devalue. It was the third time since July 31 the central bank had intervened.If it did come to a devaluation, the U.S. stock market would face another major sell-off that could take the Dow as low as 8000, Canelo said.``The markets are pretty shaky anyway and it certainly wouldn't help.''In Hong Kong, an administrative region of China, the Hong Kong dollar came under attack last week as speculators bet on a future devaluation of the yuan. Vietnam already devalued the dong by 9.1 percent on Friday.A similar move out of China or Hong Kong would have damaging repercussions throughout emerging markets while dampening hopes for any quick turnaround in the Asian financial crisis.It would also raise doubts about an improvement in U.S. corporate profits next year.``An event like that would call 1999 estimates into question and pull the carpet out from under the market,'' said Meehan. ``The risk is there and that is one more factor that makes this a fairly expensive market.''Stuart Freeman, chief equity strategist at A.G. Edwards and Sons, said the market's knee-jerk reaction could be a drop of several hundred points in the Dow to the 8300 level.The Dow touched an intra-day low of 8361 last Wednesday but had recovered to around 8600 by Monday afternoon.In the longer run, a round of devaluations in Asia could benefit Japan by allowing the weak yen to stimulate the economy, some analysts said.Canelo said for that reason, he would view any pullback in stocks as a buying opportunity with an eye toward a recovery soon after.  <hr align=left width="33%" noshade><table border=0 cellpadding=0><tr valign=top><td colspan=3>Related News Categories: <a href="/reports/world.html">international</a>, <a href="/n/z/z0002.html">options</a>, <a href="/reports/stocks.html">US Market News</a></td></tr></table><hr align=left width="33%" noshade><center><form method=get action="http://search.news.yahoo.com/search/news"><input size=24 name=p> <input type=submit value="Search News"><input type=hidden name=n value=10> <a href="http://www.yahoo.com/docs/info/news_search_help.html">Help</a></form><hr>Copyright © 1998 Reuters Limited. 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