Asian traders brace for Monday opening

By Craig Francis
CNN.com writer

HONG KONG, China (CNN) -- Asian investors are nervously awaiting the opening of markets Monday, as uncertainty surrounds how the region will respond to falling equity markets and a weekend announcement that global oil production would be slashed.

An aura of pessimism surrounds Monday's opening after last week's global slump wiped more than $770 billion from U.S. markets and Asian, European and U.S. share indexes were heavily devalued.

The Organization of Petroleum Exporting Countries (Opec) surprised analysts over the weekend by agreeing to cut output by one million barrels-per-day in an attempt to "stabilize world markets".

Coupled with a downturn in the domineering U.S. economy, the move has fueled fears of further economic downturn in industrialized economies.

Asia's already delicate economic standing -- highlighted by ailing Japanese markets, an Australian dollar at record lows and record declines on Hong Kong's Hang Seng index - is at particular risk.

Opec has expressed concern that Asia -- its main growth market -- is vulnerable to the side-effects of a slowdown in the U.S.

"If there are problems in the Asian economy, and there are already in the Japanese economy, the fall in (oil) prices could be more serious than we thought," said OPEC Secretary General Ali Rodriguez.

Regional reactions

Although not a panacea to the region's economic lull, widely-anticipated rate cuts in the U.S. are seen as a cause for optimism.

Tokyo stocks are expected to manage modest gains this week, buoyed by possible rate cuts both at home and in the U.S.

But analysts doubt changes in monetary policy alone will be enough to chase the bears away.

The benchmark Nikkei average, hovering near 16-year lows, is wrestling with fears over problem loans at the country's bank's, dwindling high-tech profits and an economy showing few signs of pulling out of its worst slump in half a century.

Politicians piled pressure on the Bank of Japan (BOJ) Sunday on the eve of a crucial policy meeting, urging it to return to zero interest rates to spur the economy and to set aside its independence.

Opec will cut production by one million barrels-per-day as of April 1

The BOJ's policy board meets Monday amid expectations of a further relaxation of its monetary policy, following two interest rate cuts in February, to bolster the country's sagging economy.

If the U.S. Federal Reserve fails to act decisively on cutting rates, Hong Kong's interest rate-sensitive banking and property blue chips could fall this week if the, extending losses in an already oversold market.

"Most people have been expecting a cut in U.S. interest rates, and if it doesn't come they will be disappointed," said Samantha Ho, equities fund manager at Manulife Funds Direct in Hong Kong, which manages US$500 million in Asia including Australia and Japan.

Hong Kong closely tracks U.S. interest rates because of the territory's currency peg to the U.S. dollar.

South Korean shares are expected to come under renewed pressure when markets open Monday after fresh profit warnings rocked U.S. tech stocks and concerns mounted over the health of the Japanese economy.

Tech shares, including the world's largest computer memory chipmaker Samsung Electronics, dominate the Seoul bourse, and closely trail U.S. tech peers in general.

Korea hopes exports can give its slowing economy a shot in the arm. The U.S. and Japan are the main recipients of Korean imports.

Singapore investors are wary of more disappointment from the United States and Japan, but hard-hit technology issues could tempt them ahead of further U.S. interest rate cuts, fund managers and analysts said.

Roy Phua, a fund manager at DBS Asset Management, saw uncertainty as a timely opportunity to accumulate technology stocks which have borne the brunt of the market's wrath.

"Share prices have come off a lot," he said. "We are close to the bottom in terms of downward earnings revisions. Some of the companies are gaining market share ahead of their U.S. competitors."

Reuters contributed to this report.

Opec to cut quotas
March 16, 2001
Japan markets hit 28-month low
February 28, 2001

OPEC

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