Relieved Asia charges forward
Regional stock markets and currencies came charging back yesterday following joint United States-Japanese intervention overnight to bolster the sagging yen, but financial professionals said the bad news was far from over.
'There's not a huge amount to be cheerful about,' Standard Chartered Bank currency analyst in Singapore Andrew Fung said.
'We've got rid of one problem in terms of the yen, but there are still many left. Recession is still coming and there's a lot more bad news on the horizon.' Franklin Templeton Group president Charles Johnson said: 'It is positive. The yen is such an important currency that something had to be done to get a bit of stability, it had fallen so far so fast.
'But supporting the yen alone is not going to cause the recession to end.' As the yen rallied stock markets in Hong Kong, Thailand, South Korea, Taiwan, the Philippines, Indonesia and Malaysia bounced sharply higher. Singapore pared its gains just before the close.
Regional currencies also strengthened. The rupiah bounced back 17 per cent to 14,000 against the US dollar but again dealers said these recoveries could be short-lived.
The yen's recovery has lessened short-term risks of any yuan or Hong Kong dollar devaluation, which many feared could have unleashed another round of hefty competitive currency depreciations across the region, analysts said.
They do not believe the problem has gone away.
Technical Data currency analyst Catherine Tan said: 'We have not seen the end of it. I don't see the yen strengthening beyond 130 [to the US dollar] and if the Japanese don't clean up their banking system, become more transparent on bad debts and strengthen their economy then the yen will be back to 150.' Even if the Japanese yield to United States pressure to conduct further reforms, it is yet to be seen whether this will translate into stimulated Japanese consumer spending.
Barclays Capital currency analyst Jonathan Hazell said: 'There's still a lot of bad news to be factored into market prices. Our long-term view is still negative. We're looking for significant depreciation.' Aberdeen Asset Management investment manager Chong Yoon Chou said: 'We hope we're not just seeing a dead cat bounce, but the region is still in a mess. Everyone's still got gritted teeth.'