The fear that gripped markets was not that of inflation leading to higher interest rates but of

The fear that gripped markets was not that of inflation leading to higher interest rates, but of deflation.It was said that recession in the Far East would force the region to chase the only growth market left - the US - which would become flooded with cheap imports made cheaper still by competitive devaluation. The crisis began not in the US but the Far East and then spread from these comparatively small economies to the world's largest stock markets. Moreover, the collapse tends to start on Wall Street and then spread to the rest of the world.What happened in October, when Wall Street looked as if it was going to crash, was the very reverse. All in all then, I probably shouldn't be awarding myself any more than about 4 out of 10 for crystal ball gazing - some of my micro-predictions on companies were wrong too.This was a year that contained some salutary lessons now just for me, but for all forecasters. Perhaps the most revealing was the way in which the bear case for equities was reinvented during the latter stages of the year. To the extent that Western markets did wobble and lose their self-confidence, this was not prompted by the usual and most predicted set of circumstances.In recent times, bear markets have generally been caused by the resurgence of inflationary pressures, sharp increases in interest rates and a consequent reduction in liquidity as economies slow and recession begins to grip.

My belief was that this would be sparked not by the bursting of the region's investment bubble, but by the Hong Kong handover, which I thought would prompt an international crisis with knock on consequences for financial markets In fact the handover could hardly have been smoother. I failed utterly to predict the economic crisis in the Pacific Rim economies - hardly alone in this - but I did forecast turmoil in the Far East. My prediction for the pound, which I said would remain strong because of rising interest rates, was closer the mark, and my reading of Japan was spot on. Tokyo, I said, would remain in the doldrums; Japanese stocks were still overvalued by international standards and there was no evidence of a revival in the Japanese economy. I can also claim to have got the rest of the Far East partially correct, though for entirely the wrong reasons. Worse still was my forecast for Wall Street, which I said would come seriously off the boil The Dow finished the year more than 20 per cent up. Fortunately, some of my other main forecasts were a little better.

I got Wall Street and the London stock markets completely wrong last year London stocks, I said, would go nowhere. In fact the FTSE 100 index rose 25 per cent, powered by financials and pharmaceuticals, and even the All Share finished the year a fifth higher. It can be put off no longer. The reckoning has arrived - the time to review my predictions for last year. This is usually a humbling experience and no more so than this time round. Orange, the newest network, is likely to be in third place, with Cellnet expected to show the smallest expansion.. Vodafone also pointed to fierce competition between Hong Kong's 11 mobile networks.In recent months Vodafone has bolstered its international strategy, offering to take a controlling interest in Libertel, the Dutch phone group, and indicating it would exercise an option to raise its shareholding in SFR, the French digital mobile operator.On Monday the four UK mobile operators will announce subscriber numbers for the last quarter of 1997, with bumper growth expected in the run-up to Christmas.Analysts expect Vodafone and One2One to tie for first place, with increases of around 150,000 in their subscriber base.

Vodafone had a 35 per cent stake in Pacific Link, with the remainder owned by First Pacific, the conglomerate. The deal is expected to be completed by 5 January. Vodafone said it would use the cash proceeds to reduce its borrowings, which were about pounds 630m at the time of the group's last financial results. The operator's share price, which soared by 80 per cent last year, rose a further 6p to 445p on yesterday's news.A spokesman said Vodafone had viewed Pacific Link as a non-core business, partly because it used the US digital mobile standard, unlike the GSM digital technology employed by the UK group and across Europe. The move follows a long-awaited HK$4.84bn (pounds 380m) deal signed on New Year's Eve between Pacific Link and Hongkong Telecom, the hugely profitable phone giant which is majority-owned by Cable & Wireless. On top of his pounds 43,000 MP's salary, he has secured a pounds 120,000 a year non-executive chairmanship of Unichem, along with jobs with BAT and F&C.- Chris Godsmark.