Guarded optimism in Asian markets ahead of APEC
Guarded optimism in Asian markets ahead of APEC
SINGAPORE (AFP): Guarded optimism prevails in Asian financial markets before the APEC talks in Malaysia with currencies expected to stay stable, but analysts say regional stocks may undergo a short-term correction.
Political developments in Washington, a glimmer of hope in recession-hit Tokyo, falling interest rates all round and a rescue for Brazil have calmed nerves in the run-up to the Asia- Pacific Economic Cooperation (APEC) jamboree.
"The recent recovery in Asian markets is real but a further rally is not 100 percent certain," said Daniel Lian, head of Asian markets research at ANZ Investment Bank in Singapore.
"Anticipate swings in market sentiment and be prepared for a downward correction. Stay invested and reap more handsome rewards in the next two to three months," he said in a weekly advisory.
The Dow Jones index closed the week 4.46 percent higher, while the dollar bounced back from recent weakness to close around 119 yen in New York late Friday.
Asian shares continued surging early last week but profit- taking reined in the bull run toward the weekend. Currency trading was largely uneventful.
"As long as the dollar remains in the 115 to 120 yen range most of the regional currencies should be fairly stable," said Eddie Lee, regional economist with investment house Vickers Ballas.
"What's capping the dollar is the hope that the Japanese will take more measures to try to stimulate the economy, so we have a situation where traders are kind of cautious," he added.
While there is some concern over Indonesia before this week's legislative meeting that will set the framework for next year's presidential election, any unrest is expected to have a limited impact on the region, analysts said.
In Malaysia the focus has shifted from street protests to a courtroom where ousted former deputy prime minister Anwar Ibrahim is defending himself.
Brazil, whose problems had spooked Washington, is now expected to receive an international rescue package of up to US$35 billion.
"Global markets remain benign, with the latest spurt encouraged by the warm and cuddly feeling resulting from expectations of another Federal Reserve easing and talk of a new G7 initiative," said Christopher Wood, a Hong Kong-based regional analyst for Spain's Santander Investment.
U.S. President Bill Clinton, whose chances of impeachment have diminished after the strong showing by his Democratic party in mid-term polls, is expected to unveil his plans to spur world growth at the November 17-18 APEC summit in Kuala Lumpur.
The summit will coincide with the next meeting of the U.S. Federal Reserve's Open Market Committee, which is tipped to further ease interest rates.
Fed chairman Alan Greespan's remarks last week hinting that financial markets were starting to stabilize boosted sentiment.
Leaders of the Group of Seven (G7) industrial powers have called for changes in the global financial structure and more transparency in the International Monetary Fund (IMF) while pumping more funds into the world's lender of last resort.
In Japan economic planners, after months of grim forecasts, said Friday they had spotted a glimmer of hope after the government announced bank reforms and stimulus measures. But they warned it may not be enough to end the recession.
Barton Biggs, top global investment strategist at Morgan Stanley Dean Witter, said in a report that "Japan could be the next great trade" and cheap Tokyo stocks were ripe for the picking.
Lehman Brothers also called for overweighting Japanese banking stocks.
But Santander's Wood warned against complacency.
"The key trigger point for the global emerging market universe, including Asia, remains Brazil. Investors would be foolish to assume that this country is past the crisis point," he said.
He said he remained bearish on Japan despite the growing number of bullish forecasts. "The credit crunch there will get worse before it gets better," he said.