Asian stock prices seen mixed in week ahead

Asian stock prices seen mixed in week ahead

HONG KONG (Reuter): Asian stocks are likely to put in a mixed performance over the coming week, torn between strength in U.S. financial markets and negative local factors, analysts said.

"Markets are very confused," said one fund manager. "They're taking their cue from the (U.S.) bond market, which seems quite relaxed about the economy. But Asia has its own cycle to worry about. We've got disinflation and high real interest rates."

Friday's rally in U.S. financial markets could support some of the better-performing Asian indices, particularly those with a strong link to the United States through currency pegs, the analysts said.

The Dow Jones Industrial Average closed 94.72 points or 1.36 percent higher at 7071.20 on Friday after U.S. economic data cooled expectations of another interest rate increase at the Federal Open Market Committee meeting on May 20.

U.S. bonds also rallied, cheered by news that a balanced budget agreement had been reached. The benchmark long bond yield was trading at 6.88 percent late on Friday.

Hong Kong was the Asian market most likely to gain from U.S. strength, and Tokyo also appeared poised for strength as pension funds continued powering the key Nikkei 225 index higher, the analysts said.

But the generally negative tone in Asia was expected to continue dragging some of the smaller markets lower, even though a number of analysts are betting on a technical rebound, after recent steep losses.

"Some of these markets are looking very oversold technically," the fund manager said, referring to Manila's 20-percent slide since January.

"We expect a bounce, but I think there is still a questioning of the Asian story by institutional investors, many of whom are still overweight so if there is a rally people will be selling into it," he said.

In Tokyo, stocks are likely to extend gains in the coming week, propelled by more buying by pension funds and other domestic institutional investors after their return on Tuesday from a long weekend, brokers said.

"The recent rise has been so sudden that market participants are beginning to feel afraid of being left behind," said Nobuhiro Kaneda, general manager at Daiwa Securities Co Ltd.

On Friday, due to a wave of pension-driven purchases, the 225- share Nikkei average rose 239.42 points or 1.24 percent to end at 19,514.75, jumping above the previous closing high for 1997 of 19,446.00 set on January 6, the first trading day of year.

In Hong Kong, stocks should continue climbing in the week ahead, powered by a strong Wall Street and hopes of a pick-up in the local real estate market, analysts said.

The Hang Seng Index broke above 13,000 points last week for the first since mid-March and over the week recorded a gain of 435.94 points, or 3.45 percent, to close at 13,081.70 on Friday.

"Sentiment has swung back to optimism now," said Alex Tang, head of research at Yamaichi International.

"Fears of a (U.S.) interest rate hike have already subsided. Also the property market is showing signs of recovering from the past month's lackluster performance," he said.

Analysts said the surge in the Dow industrials on Friday should give the local market a strong boost early in the week.

In Taipei, Taiwan share prices are expected to continue their downward correction in the coming week, with investors lacking confidence in the market's potential for gains due to concerns that many share prices are overvalued, brokers said.

"The downward correction will continue in the next week," Huang said.

On Saturday, the index rebounded to finish 127.67 points or 1.56 percent higher at 8,314.67. It closed at 8,661.72 a week earlier. A 8,000-8,400 range was seen for the week ahead.

In Manila, further weakness is expected for Manila's main stock market index after weak corporate earnings and concerns about the health of the property market sparked a savage nine- percent sell-off last week, traders said.

The main index closed lower for the sixth straight session on Friday, falling by 42.52 points to 2,605.65. Week-on-week, the index lost 266.72 points, or 9.29 percent, from the previous week's 2,872.37 points.

In Kuala Lumpur, Malaysia stocks are expected to gain in the coming week, supported by Friday's rise on Wall Street, but sentiment remains nervous, traders said.

"This rise in the Dow Jones could actually help to sustain a little bit the gains made on Friday," said Faez Khairuddin, head of research at SJ Securities. "We have been saying before that the rise was not sustainable because of no follow-through support," he added.

Sentiment will continue to be skittish due to large numbers of "stale bulls", those who had bought at much higher levels, and were waiting to sell when a firm recovery took place, traders said.

In Bangkok, Thai stocks are expected to rally slightly in the week ahead as the market reacts to a recent 25-basis point cut in Thai bank lending rates and signs of improving exports, brokers said.

The composite SET index retreated 3.49 percent during the week to close at 660.10 on Friday, down 1.19 points on the day.

"The Thai interest rate cut, along with improved export figures released by the customs department earlier (last) week, will likely spur sentiment next week," said Thanadech Mahapokai, assistant vice president of Book Club Finance and Securities.

In Seoul, stocks are expected to rise in the week ahead in active trading as a foreign stockholding limit expansion helped to increase liquidity, brokers said.

They said some 500 billion won would flow in by the next week with the expansion. The ceiling on foreign stock holdings in individual companies was raised to 23 percent from 20 percent last week.

The composite stock index ended at 704.87 on Saturday, up 5.11 points or 0.73 percent from 699.76 last Saturday.

In Singapore, some upside was seen for Singapore shares in the coming week after Wall Street surged on Friday on economic data which raised doubts about the prospect of another U.S. interest rate hike in May, dealers said.

"The interest rate rise predicted for May could now seem unnecessary and I think we'll see some foreign bargain hunting, particularly in property stocks, as a result," one dealer said.

The key Straits Times Industrials Index ended up 11.97 at 2,016.23 on Friday, 3.37 points or 0.17 percent lower from last week's close of 2,019.60.

In Sydney, Australian shares were likely to be well supported in the near term with the consolidation of last week set to continue, traders said.

The All Ordinaries index closed at 2,491.6 on Friday, up 0.25 percent or 6.2 points from Thursday and 0.7 percent up over the week. However, the index has slipped from its record high of 2,515.1 reached on April 30.

"Our market hasn't gone crazy at any time and there is enough in the market to keep it interesting," said Andrew Sekely, head of equities at Intersuisse.

In Wellington, New Zealand share prices are expected to push higher in the week ahead if the current trend of a market-led easing of monetary conditions continues, brokers said.

The NZSE-40 Capital Index ended the week 11.42 points up from Thursday's close at 2,277.53, or a 23.96-point (1.06 percent) improvement from last week's close of 2,253.57.

Tim Koller at Merrill Lynch said the rally in interest rate markets and the lower New Zealand dollar sparked the gain.

"There will be optimism on the local front, tempered slightly by the prospect of overseas volatility," he said.