Asian stocks may be weak, volatile

Asian stocks may be weak, volatile

HONG KONG (Reuter): Asian stocks are in a slump and little is expected to change in the coming week.

Foreign investors said they were bailing out on an uncertain U.S. interest rate outlook as better-performing Latin American and European markets were winning the increasingly competitive race for the emerging market dollar, they said.

"I think Asia's just going to die a death, basically because of interest rates in the States," said one regional trader.

Asian stocks were suffering from expectations of another U.S. interest rate increase at a meeting of the U.S. Federal Reserve's policy-making committee in May.

It could become the second U.S. rate rise this year.

The only market of interest to investors, outside Japan, was in Hong Kong where "red chip" stocks -- companies heavily exposed to China -- continued to rally strongly.

Due to its relatively good liquidity, Malaysia was considered the only viable alternative to Hong Kong. Manila was expected to continue suffering from uncertainty surrounding its property sector while Thailand dallied in the doldrums.

In Hong Kong, stocks were likely to see more volatility early in the week, then trend sideways in a cautious tracking of trends in U.S. markets, brokers and analysts said.

"We remain very closely correlated to the long end of the U.S. bond market," said Angus Steel, chief investment officer at Fortis Investments (Asia) Ltd.

The Hang Seng Index closed 81.02 points, or 0.64 percent, lower at 12,645.76 on Friday, near the day's low of 12,643.28.

Turnover climbed to HK$15.15 billion. Hong Kong stock exchange figures showed Friday's turnover to be the fourth heaviest ever.

The index gained 104.58 points or 0.83 percent on the week.

Trading related to the expiry of the April Hang Seng Index futures contract on Tuesday could lift the index higher early in the week ahead, brokers said.

In Tokyo, the stock market's benchmark index was likely to test 19,000 in the coming week on continued support from pension funds which have been buying actively.

"Bargain-hunting by pension funds as well as foreign investors reshuffling their portfolios should support the Nikkei average in times of weakness," Ken Ishikida, Sanyo Securities general manager, said. "But the upside is heavy near the 19,000 line and the rise will be gradual."

On Friday, the 225-share Nikkei average closed 85.21 points or 0.46 percent lower at 18,612.86. On the previous Friday it closed at 18,352.14.

The benchmark index rose about 1,000 points over the past two weeks, boosted mostly by pension funds buying blue-chips.

In Bangkok, the stock exchange Index was expected to fall in the week ahead as continued economic pessimism and expectations of poor first quarter results from non-financial sectors damage sentiment, analysts said.

The index declined for a seventh straight session on Friday, shedding 4.42 points to 684.00. The market lost 16.23 points, or 2.32 percent from the previous Friday, leaving it just above the year's low close of 676.65 recorded on March 6.

Bank of Thailand monthly economic statistics released on Thursday suggested the economy was slowing and bank officials acknowledged it would be hard to match even the 6.7 percent recorded in 1996, the slowest this decade, analysts said.

"It's gloomy and I don't see any good news on the horizon yet," said one senior foreign analyst.

In Kuala Lumpur, shares were expected to stay weak due to a lack of institutional buying but any downside was likely to be limited, dealers and analysts said.

"The market will remain weak. It is almost bottoming out but there's no sign of buyers returning to the market," said Phua Lee Kerk, head of research at Jupiter Securities.

Analysts said investors were still digesting the impact of the recent move by Malaysia's central bank to curb financing to the property sector and for share purchases.

At best, the benchmark Composite Index will trade between 1,100 and 1,120, Seow said. The index closed on Friday at 1,089.45, down 15.13 points or 1.37 percent for the week.

In Manila, shares were expected to remain weak and volatile as lingering fears about the property and banking sectors were likely to further rattle the bourse, traders said.

"More and more foreign investors are jumping into the bandwagon that says the property sector remains vulnerable," said Raul Ruiz, vice-president at Sun Hung Kai Securities.

Traders said that if Philippine Long Distance Telephone Co reported strong first quarter earnings results on Monday it could provide some cheer to a dull market.

The main index ended sharply lower on Friday, dropping 33.96 points to 2,872.37. Week-on-week, the index posted a steep decline of 72.61 points, or 2.53 percent, from 2,944.98.

In Seoul, stocks are expected to rise early next week, helped by institutional buying of blue chips ahead of Friday's expansion of the foreign shareholding limit, brokers said.

But the market is seen falling on Friday as institutions are likely to sell heavily to take profits, banking on the rise of the limit to 23 percent from the current 20 percent.

"In the past, institutions heavily sold on the day when the ceiling was raised. I see no exception for this time," said Park Byung-moon, head of research at LG Securities.

The composite index closed at 699.76 on Saturday, down 0.89 points from last Saturday's 700.65.

In Sydney, shares were seen capturing further gains next week as local investors sought out keenly valued blue chip stocks after the long weekend hiatus.

The All Ordinaries index closed at 2,474.7, up 0.1 percent, from Thursday and 1.3 percent over the week.

Local stocks were seen as good buys with the firm tone likely to hold on the basis of fundamentals rather than Wall Street's gyrations, although positive U.S. sentiment would help.

In Taipei, share prices are expected to be volatile next week as the market now faces its six-year resistance at around 8,700 points, brokers said.

Several brokers said the 8,700 resistance level would be hard to break through in the near term.

But National Securities analyst Oliver Fang was more optimistic.

"If the government makes no negative moves on recent stock market gains, the index should go on its firming trend to test 8,800 or 8,900 next week," Fang said.

On Saturday, the index ended up 7.53 points at a six-year closing high of 8,661.72. Saturday's close was up 4.33 percent from 8,302.25 a week earlier.