Asian stocks likely to be on guard
Asian stocks likely to be on guard
SINGAPORE (Reuters): Asia's equity markets will track the weak
yen again this week as worries about the Japanese currency's dive
and its effect on other economies continue to haunt the region,
analysts said.
Most bourses lost ground sharply last week as the yen tumbled
to a near eight-year low of 144.75 to the dollar and as Japan
released growth figures showing the economy had entered its first
recession in 23 years.
The country's first quarter gross domestic product posted a
shocking annualized 5.3 percent drop, after fourth quarter
figures for last year had shown a 1.3 percent contraction.
The yen's fall intensified speculation that China could
devalue its yuan to boost exports in the face of depreciating
Asian currencies. Analysts say that could set off a new chain
reaction of currency and stock market falls throughout the
region.
"We know the economies are getting worse, not better," said
Hugh Young, managing director at Aberdeen Asset Management.
This week "will be more of the same", he said.
All key Asian stock markets finished last week lower. Their
losses ranged between two percent on the Nikkei to 12.2 percent
on Thailand's SET index.
South Korean stocks sank 11.5 percent on the week, after
losing 8.1 percent or 26.61 points on Friday to end at 302.09,
the lowest finish in 11 years. The index slumped below the key
300-level briefly on Saturday as traders reacted to the Japanese
GDP figures but recovered later in the session to close at
302.81.
As well as keeping a close eye on the yen and other regional
woes, the Seoul market is likely to focus on a news conference on
Thursday or Friday at which the country's Financial Supervisory
Commission is due to announce a list of non-viable companies.
The commission's deputy spokesman recently told Reuters that
bank creditors would cut new credits to companies on the hit list
and call in loans to encourage mergers or liquidation.
Japan's stock market closed before the dismal GDP figures were
released, and analysts said they expected the Nikkei index to
lose more ground this week as economic recession and the yen's
downtrend fueled market pessimism.
"The sell-Japan camp will like it (the GDP number) very much,"
said Pelham Smithers, a strategist at ING Barings.
On Friday, the 225-share Nikkei average closed at 15,022.33,
up just over eight points on the day but down 301.1 points from
its finish a week earlier.
"The number one variable has to be the yen," said Liew Yin
Sze, regional economist at J.M. Sassoon. "I think it's beyond me
to tell where the yen will be."
The yen ended New York trade at 144.18/28 to the dollar on
Friday, after hitting a low of 144.75 earlier, its lowest point
since August 1990.
Analysts said the yen's weakness was likely to weigh on Hong
Kong stocks again in the coming week, sending the Hang Seng Index
down to test key support levels.
The Hang Seng Index dived 7.6 percent last week, below the
8,000-level, amid worries that Japan's currency fall could put
the territory's dollar-peg under strain and force local interest
rates up.
"It's a very technical market short-term and it is totally
sentiment driven," said Robert Sassoon, head of research at SG
Securities.
"We think fair value of the market is above this (the current
level), around 8,200 in the very near term but the market
continues to have a tendency to undershoot that," he said.
The Hang Seng Index closed up slightly at 7,915.44 on Friday.
Even without the yen's decline, the outlook for many Asian
stocks is looking shaky.
Aberdeen Asset Management's Young said his company, which has
more than US$1 billion under management, was being "very careful"
about stock picks by, for example, choosing companies with strong
balance sheets and reporting practices.
Mutual fund behemoth Fidelity Investments has seen both its
assets under management and its revenue dive by 45 percent in the
last 12 months.
In the past week, Fidelity's funds under management dropped to
$17 billion from $20 billion a week or so ago.
"Actually, of course, the numbers have gone down significantly
just in the last week with all the devaluations," Brett Goodin,
managing director for Fidelity's Asia-Pacific region, told
Reuters on Friday in Hong Kong.
Earnings prospects across the region are dim.
Still, Taiwan's stronger fundamentals have not shielded it
from the sell-off. Its dollar was dragged to an 11-year low by
the yen last week, and attempts to support the stock market by
the government have foundered.
Taiwanese Finance Minister Paul Chiu acknowledged on Thursday
that government-linked funds had been buying stock, saying that
if they were finding attractive value in the deeply corrected
market, investors should too.
Despite the appeal, Taiwan shares ended down 93.63 points or
1.30 percent at 7,117.11 on Friday.
"The falling yen is the main culprit," Nomura Securities
research head Jeffrey Liang said. "There is no indication it will
stop falling soon. Frankly, Taiwan has absolutely no control over
the situation."
India's shaky stock markets are also expected to face negative
sentiment this week after the minority coalition government
tinkered with its maiden budget for the third time in 11 days and
the world's top industrialized countries froze most loans to the
country as punishment for its recent nuclear tests, fund managers
and analysts said.
The Bombay Stock Exchange finished 2.06 percent, or 70.48
points, lower at 3,347.41 last week. It has lost about 20 percent
since early May and is down 12 percent since the June 1 budget.
"I can only pray," said Anand Radhakrishnan, a fund manager at
Sundaram Newton Asset Management Co Ltd in the southern city of
Madras. "I think there's still some downside. The market has not
bottomed out."
Some markets may provide trading opportunities after the steep
losses, said Liew of J.M. Sassoon.
In Singapore, for example, "there are some good values," he
said. Any retracement of the Straits Times index toward a January
low of 1,031 could draw buying, he said.
The index finished on Friday at 1,091.49, up 0.61 percent or
0.43 percent.