Asia Recovery?

Henry C.K. Liu hliu at mindspring.com
Fri Apr 16 22:45:17 PDT 1999


Saturday April 17 1999

Bank stocks lead in foreign cash flood

CATHY HOLCOMBE

Markets soared in Southeast Asia and Hong

Kong yesterday as overseas investors bought

up banking, property and technology-related

stocks amid signs of growing liquidity and

confidence in the region.

The Hang Seng Index crashed through 12,000

points for the first time in 17 months and then

kept on going, ending the day up 4.41 per cent

at 12,490.3.

Thailand's benchmark index soared 8.59 per

cent in its first day of trade following a

three-day holiday, while a rare burst of

institutional enthusiasm pushed Indonesia's

battered index up 7.16 per cent.

"Liquidity is coming in because interest rates

are coming down, currencies are stable and

Asia looks very cheap from North America,"

said SSB-Citibank Asset Management director

Giampaolo Guarnieri.

While Mr Guarnieri believed Asia offered value

on a two-year view, he said the swiftness of

regional market jumps in the past month

smacked of rally-chasing by fund managers

fearing benchmark underperformance.

"The shift towards Asia, it's getting a bit

crazy," he said.

Markets in Japan, Korea and Australia saw

smaller gains yesterday, but all three hung on

to long-time highs reached in the past month.

Korea and Japan can thank their rallies on

overseas funds, which yesterday appeared to

switch to "laggard" markets in Indonesia and

Thailand.

"It's foreign money flowing in," said James

Mitchell, head of research at Salomon Smith

Barney Thailand.

He said investors were celebrating "a very

strong performance on Wall Street, signs of

commodity prices stabilising and global

growth".

The Dow Jones Industrial Average's quick

march to a record 10,462.72 on Thursday -

less than a month after its first close above

10,000 - has boosted sentiment in Asia as well

as made stocks in the region look

comparatively cheap, analysts said.

Banking giant HSBC, for instance, is one of

the only major Hong Kong blue chips trading

on valuations comparable with Wall Street's

market. HSBC jumped $7 to $277 yesterday, a

whisker away from its record high of $279

reached in July 1997.

A rise in banking and property stocks was

behind the Singapore Straits Times Index's

3.73 per cent jump yesterday, while Malaysia's

composite index advanced 3.01 per cent.

The Philippines rallied 2.58 per cent, bringing

its week's gains to 6.12 per cent following

market-boosting cut in interest rates.

While technology stocks have lost ground in

Japan and Taiwan in the past two days, the

more recent Hong Kong technology stock run

continued apace.

Internet fever has fuelled rallies in the stocks of

Hongkong Telecom and Wharf Holdings - the

former is the SAR's dominant Internet service

provider while the latter recently announced

plans to offer hi-speed Internet access through

its cable network.

"In Asia if you're looking at basic Internet

services and ISP [service providers], etc, it's a

brand-new market, it's a huge market," Mr

Guarnieri said.

"It's almost a virgin territory."

Mr Guarnieri said that Nasdaq-listed Pacific

Internet, based in Singapore, or Internet plays

in Japan and India offered bigger markets and

more innovation than Hong Kong's Internet

plays.

HSBC Securities Asian strategist Abhijit

Chakrabortti said regional markets would

continue to gain from asset re-allocations by

the world's money managers, but that he felt

the SAR could lead the pack. "Markets like

Singapore and Korea are pretty well owned in

regional portfolios but most people, because of

concerns about dollar risk or high real interest

rates, have been relatively underowned in

Hong Kong."

Brokers said Asian fund managers added fuel

to the stocks run in Hong Kong, as they

switched out of fixed-rate deposits or lowered

cash allocations.



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