Currency woes in Asia seen pressuring stock markets

Currency woes in Asia seen pressuring stock markets

HONG KONG (Reuter): Asian stocks are seen mixed over the coming week, with most markets under pressure from persistent currency woes.

Even Hong Kong, which has gained on institutional interest as other markets slumped, is expected to come under selling pressure after reports of speculation and heavy hedging pushed currency forwards to their highest levels in two years.

The possibility of a speculative attack on the Hong Kong dollar is considered remote, given the territory's strong economic condition and huge reserves.

But the entire region has fallen under a cloud of gloom after currency speculation exposed the quirks and inadequacies of some Asian economies.

The Association of South East Asian Nations (ASEAN) wrapped up a two-day ministerial meeting in Kuala Lumpur on Friday pledging to tighten cooperation in staving off attempts to "destabilize" members' currencies.

In Tokyo, stocks are likely to be trapped in a narrow range this week, with the downside supported by bullishness in Wall Street stocks, brokers said.

The market is waiting for administrative penalties against Nomura Securities Co Ltd, expected to be announced some time this week, but they have already been mostly factored in and are unlikely to rock the market, they said.

On Friday, the 225-share Nikkei average closed at 20,389.54, up 140.22 points from its closing a week earlier.

In Hong Kong, stocks are expected to come under some selling pressure in the week ahead due to currency worries, analysts said.

"This week will be a interesting, crucial time," said Frederick Tsang, head of research at BNP PrimeEast Securities. Investors will be watching Hong Kong dollar currency rates and overnight lending rates for any signs of speculation and hedging, Tsang said.

The Hang Seng Index closed 51.11 points, or 0.33 percent, lower at 15,658.12 on Friday after hitting an all-time high of 15,880.57 on Thursday. Over the week the index gained 87.72 points or 0.56 percent.

In Bangkok, Thai stocks are expected to decline slightly in the coming week as the Thai baht falls and listed companies report poor second quarter earnings, brokers said.

The Stock Exchange of Thailand (SET) index fell 1.04 percent in the week to 646.58 points on Friday from a week ago. It gained 1.98 percent from Thursday.

"No positive factor is seen so far," said Chetta Meemangkang of Prime Finance and Securities.

In Manila, Manila shares are likely to languish in negative territory as concerns over high domestic interest rates and the currency turmoil in the region continue to hound the market, traders said.

"It's still a question of when the central bank will lower rates and until they do, this will overshadow corporate earnings," said Allan Araullo, vice-president at Regina Capital Development.

"The trend next week will still be downwards. If the attack on the Southeast Asian currencies continues, we may be in for another correction," said Cilette Liboro, research head at Orion- Squire Capital.

The main index closed 0.11 points lower at 2,572.69 points. Week-on-week, the market shed 100.26 points, or 3.75 percent, from the previous Friday's 2,672.95 level.

In Seoul, Seoul stocks are expected go through further consolidation as fears of corporate failures continue to haunt investors, brokers said.

"Investors are likely to remain cautious early next week as they lack confidence to jump in to the market as corporate troubles linger on," said Choo Hee-yup of Dongwon Securities. Brokers said a rebound was possible toward the end of the week as corporate woes are expected to ease down.

A trading range of 710 to 750 is forecast.

The composite index closed at 732.32 on Saturday, down 9.83 points from last Saturday's 742.15.

In Singapore, dealers said they expected technology stocks to dominate market activity after the SES Electronics index powered to a new high of 159.13 on Friday.

The focus will be Venture, which leapt 33 percent after it launched a new multi-media software audio product and on whether it can sustain gains.

Dealers said there could be some profit taking but this is expected to be well absorbed.

In Sydney, Australian shares are seen stronger near term with hopes high for an interest rate reduction after key economic data presented a compelling case for the Reserve Bank to act.

The All Ordinaries index closed at 2,691.2, up 0.6 percent on the day and up 0.3 percent on the week.

Rate cut speculation supported a firmer finish to the week and dealers said the major question now appeared to be the timing of a cut.

In Taipei, Taiwan's red-hot electronics shares are expected to continue to carry the market, helping the benchmark stock index to test the 10,000-point level, brokers said.

Aided by heavily weighted technology shares, the stock index was able to maintain its momentum in the past week. An additional boost from financial shares allowed the index to close a fresh seven-year high at 9,869.25, up 60.34 points or 0.62 percent on Saturday.

But brokers cautioned that continued bull run of the electronic sector would absorb funds that would have otherwise been pegged to other shares.

Brokers said in light of the 10,000-point level, investors would become cautious and tend to take profits easily.

In Wellington, foreign investors returned to the New Zealand stock market late in the week as short-term interest rates steadied and the dollar seemed to have found a floor.

Brokers said strong interest in index heavyweights suggested a trend back towards record territory will continue next week.

This week saw the NZSE's Top 40 index restore 50 of the 60 points it lost last week, and it ended at 2,510.61 putting in range of its record closing high of 2,538.30 set on July 4.