Jardine Fleming has joined an increasing number of investment houses forecasting a regional correction, saying recent rallies by equities markets may unwind when the focus of investors next year switches back to poor fundamentals.
Strategist and head of regional research Andrew Houston said yesterday that the rebound of regional markets off their summer lows were liquidity-driven and could crumble next year.
'Lower [United States] and Asian interest rates and reductions in high cash positions have led to rapid liquidity-driven rallies,' Mr Houston said.
'However, poor fundamentals will return to haunt the markets by the first quarter of 1999.' Cash positions in funds in Asia, excluding Japan, were down to 10 per cent at the end of October from 16 per cent in September and a record 22 per cent at the end of August, he said.
'We fear that the poor external environment, the risk of a resumed weakness of the Japanese yen and the slow pace of banking recapitalisation will return to haunt Asia within the next few months,' Mr Houston said.