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.