Asian financial markets will probably languish in the slow lane for much of this year, leaving regional currencies largely untroubled, interest rates low and share-market performance patchy. That assessment was delivered yesterday to HSBC clients in Hong Kong at the bank's annual Asian Outlook conference. The good news, according to HSBC researchers, was that concerns about a collapse in the value of the yen leading to competitive pressures on regional exporters were overblown. Expectations about a surge in Hong Kong interest rates were also exaggerated. China's big debt issuance programme would probably ensure that it would maintain stability of the yuan. Head of Asian equities Mark Coggins said setting the tone for regional stock exchanges would be a gradual recovery in United States markets. In addition, delayed economic recovery in the SAR and regulatory and competitive pressures in China were 'likely to feed through lacklustre market performance in Hong Kong'. While HSBC recommended a neutral weighting for Hong Kong stocks in regional portfolios, it would be overweight in South Korea, for its strong domestic consumption and restructuring; and Taiwan, because of the outsourcing trend. On the currency front, HSBC currency strategist David Bloom said: 'The solution to Japan's problems lies in structural and economic reforms, not competitive devaluation. So we do not see a continuation of the present sell-off of the Japanese currency.' He said the 350-basis-point surge priced by the market into Hong Kong's benchmark three-month Hibor (interbank offered rate) over the next two years was exaggerated. He believed domestic rates were unlikely to rise more than 250 basis points over the period and would trade in between 1.6 per cent and 2.4 per cent this year.