Panic selling predicted when Asian stock markets open later todaygreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Sunday April 16, 1:22 am Eastern Time
WEEKAHEAD-Asian stocks brace for aftershocks
By Karen Richardson
HONG KONG, April 16 (Reuters) - Asian stock markets are bracing for steep corrections this week after fears of higher U.S. interest rates mauled Wall Street and Europe on Friday.
``Friday's crash on Wall Street is likely to trigger panic selling early next week focused on high-tech and telecom shares,'' said Na Min-ho, senior strategist at Daishin Securities in Seoul.
Following the technology-laden U.S. Nasdaq's (^IXIC - news) 9.67 percent drop, analysts said vertigo-stricken investors in Japan, Hong Kong and South Korea would dump high-flying tech shares.
But old economy plays such as properties, utilities and consumer goods, especially in emerging Southeast Asian markets, could begin to shine again as techs lost lustre, they said.
``The corner has turned, definitely,'' said Andrew Look, regional director at Prudential Portfolio Managers (Asia) in Hong Kong.
``People will still pay a premium for growth, they will still pay for dreams, but they will be more selective.''
In New York, the Dow Jones average (^DJI - news) also fell heavily on Friday, shedding 5.66 percent as worse-than-expected U.S. inflation data sent shockwaves through global markets.
Taiwan, which was the first Asian market to react to Wall Street's latest slide, tumbled 5.42 percent on Saturday. But further downside for the Taiwan Weighted (^TWII - news) index was seen limited due to strong corporate fundamentals and overseas demand.
Financial leaders of the Group of Seven (G7), the world's richest nations, put a brave face on the U.S. markets plunge.
``Prospects for expansion in industrial countries and the world economy more generally continued to brighten,'' said the G7 communique, drafted at a meeting in Washington on Saturday.
TOKYO, HONG KONG, KOREA BRACE
In Hong Kong, where telecom stocks and a batch of Internet plays had driven a recent six-month-long bull run, analysts expected the blue chip Hang Seng Index (^HSI - news) to dive through support at 16,000 points. But since sinking 4.7 percent last week on tech weakness, the index was expected to see near-term bargain-hunting.
``Hong Kong is already very oversold. This would be the last leg down in the short-term correction and we'll see a rebound sometime later next week,'' said Look. ``But this would just be a rebound, not a resumption of the bull market,'' he added.
Analysts in Tokyo didn't see any long-term fallout from the U.S. slide, although they said a correction of overvalued Japanese Internet stocks would continue.
``It's possible that the chain effect of volatility may hit the Tokyo market,'' said Masaaki Higashida, deputy general manager at investment information and services department of Nomura Securities Co Ltd.
``But even so, it would be largely psychological and wouldn't last long,'' he added, noting inflation wasn't a problem in Japan.
In Seoul, the main KOSPI composite was also seen sliding further after it slumped 4.32 percent on Friday as heavyweight telecom and microchip manufacturers plummeted.
A fund manager at Korea Investment Trust Co said the over-the-counter Kosdaq market was expected to take a bigger hit than the main exchange.
CHINA SPARED, INDIA EXPOSED
China shares were expected to ride out the storm due to their mostly ``old economy'' profiles.
``They may be under pressure from panic-selling by trust redemption and retail investors, but I don't see much downside on China shares because they are very cheap already,'' said Look.
In India, the main Bombay Stock Exchange Sensex (^BSESN - news) was expected to dive, with most shares opening down the daily limit of 8.0 percent.
``The market will fall 200 to 300 points on Monday. Most shares will open eight percent limit down,'' said Anthony Sequira, managing director at Arcadia Share & Stock Brokers.
Shares in Malaysia (^KLSE - news), which like Hong Kong pegs its ringgit currency to the U.S. dollar, were seen dropping sharply.
``Except for Hong Kong and Malaysia, most Asian currencies are decoupled from the U.S. dollar,'' said Eric Ikauniks, analyst at Jardine Fleming Securities in Hong Kong.
``Most Asian countries like Singapore and South Korea have independent economic policies and their financial markets will not be so sharply affected by the latest U.S interest rate concerns,'' he added.
The New Zealand share market will be the first to open for the new week (2130 GMT on Sunday) and analysts expected a drop of three to five percent, despite the NZSE-40 Index already being weak.
SOMETHING OLD, SOMETHING BLUE
A cooling off of hot technology issues would rekindle interest in the emerging markets story, just as investors were revisiting old economy blue chips, analysts said.
They said there were opportunities in utilities, including some telecoms, and laggard property stocks as well as agriculture stocks in Southeast Asia.
There could also be other benefits for Asia from a global market correction and a reassessment of tech stocks.
``It will dispel whatever complacency that is lurking in Asia about the need to continue to restructure and to focus on efficient allocation of capital and other resources.'' said Andrew Ballingal, chief strategist at Schroder Securities in Hong Kong.
-- Carl Jenkins (Somewherepress@aol.com), April 16, 2000