Performance mixed at Asia markets


  • Business
  • Thursday, 01 Jul 2004

BY JAGDEV SINGH SIDHU

MAJOR Asian markets were mixed during the first half of the year, with Tokyo's Nikkei 225 emerging as the region's best performing index and last year's darling, Bangkok's SET Index, the worst. 

Tokyo's performance has been credited to the stunning economic growth shown by the Japanese economy during the first quarter. In Bangkok's case, profit taking and uncertainty were the factors cited as the cause of the decline. 

The majority of the markets in Asia ended the second quarter much differently from how they performed in the first quarter of the year. 

Concerns over rising oil prices, a planned cooling of China's economy, and higher interest rates were the banes of the stock market during the second quarter, and each of those worries had a different impact on the stock markets. 

Analysts said the impact of higher oil prices was more of a concern to such net oil importers as Thailand and South Korea. The SET Index and Kospi were down 16% and 3%, respectively, from the start of the year. In Thailand's case, analysts said unrest in the southern provinces and foreign funds taking profit swung the fortunes of stocks downwards. 

Higher oil prices was also seen as a drag on Asian economies, from the implications these might have on inflation, interest rates and economic growth in the US and Europe. 

Selling by foreign funds was said to be the root cause of the decline in South Korea and in a number of Asian markets.  

That was in part due to worries on the impact of higher interest rates in the US on Asia. 

The research head of a local stockbroking company said investment decisions by foreign funds throughout Asia were weighed against the potential implications of higher interest rates in the US. 

Unsure of the pace of interest rate increases, foreign funds were selling down their Asian portfolios out of anxiety arising from fears of a repeat of the 1994 scenario.  

Then, emerging markets, including Bursa Malaysia, had a terrible year when rising interest rates in the US made investments in up and coming economies in Asia less attractive. 

Fast rising interest rates in the US had skewed the risk return equation for investing in equities, and markets turned volatile during that period of rate increases. 

While the worries on oil, interest rates, and China's economy had sapped sentiment and upward momentum in a number of Asian markets, not all wallowed. 

Japan's Nikkei 225 rose sharply during the second quarter and ended the first six months up 11% as investors were encouraged by GDP growth, which expanded by 6.1% on an annualised rate during the first three months of the year. 

Even though Japan was the top performing major market in terms of percentage gains, it could not beat the upbeat mood in Australia. 

The S&P/ASX 200 surged to a record level in June on high commodity prices and the rosy outlook for resource-based stocks. 

Major European markets as at June 29 were showing gains for the first six months of the year, with Paris' CAC 40 up 5%, and Frankfurt's DAX nearly 3%. The Dow Jones Industrials Average was down less than 1% for the first six months, while the Nasdaq was up 1.58%. 

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