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IN ASIA: Rough ride for many more weeks: Analysts

HONG KONG – IF THE past week’s roller-coaster ride in Asian stock markets is anything to go by, investors should strap in tight for another bumpy ride in the coming sessions.

Ongoing jitters about a global credit squeeze and uncertainty about the fallout from the US sub-prime mortgage crisis will continue to roil markets, analysts say.

‘We’re going to see a pretty volatile ride over the next couple of months,’ said Mr Shane Oliver, head of investment strategy at AMP Capital in Australia.

‘But it’s not a bear market. As is often the case, the longer the bull market, the deeper the corrections become, and that’s exactly what we’re seeing at the moment.

‘The fundamentals globally still look pretty good…and most companies are in pretty good shape to deliver ongoing profit growth.’

Mr Sean Darby, a regional strategist at Nomura, said he expected ‘ongoing indiscriminate selling’ in regional markets as banks were likely to sell Asian stocks to fund their losses in illiquid assets such as sub-prime debt.

‘Irrespective of their fundamentals, Asian equities will be used as a source of funding to meet cash calls,’ he said. ‘It’s going to be a rough ride for the next couple of weeks.’

Analysts and economists differed on just how long or how closely Asian markets would remain tethered to the unfolding drama in the US housing market.

Most predictions have to do with ongoing debates about the vulnerability of the Asian economic and financial boom to the sub- prime fallout.

The first debate centres on the relative Asian dependence for growth on US demand for imports.

While some say Asian economies have generated enough trade with one another to offset a US slowdown, others say Asia will be hurt if the sub-prime mess translates into broader US housing problems and lower consumer spending.

The second debate centres on the source of the cash driving up Asian asset prices.

Some say the bulk of those funds comes from Asia’s own vast pile of savings, and that they are bound to find their way back into local markets once calm returns.

Others, however, contend that the sub-prime fiasco is part of a broader retreat by global capital – a retreat from risk.

Mr Christopher Wood, CLSA’s Hong Kong-based chief Asian equity strategist, said investors should consider the current drop in global stocks as a chance to acquire Asian shares that will rise once the crisis has passed.

 

Source: The Straits Times 12 Aug 07

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