"I hope we're approaching the bottom, but this is still an extremely sensitive environment and it wouldn't take much to blow it off course," said one diplomat in Tokyo.

Economists share those concerns. "The platform for recovery in some Asian countries is becoming firmer," said Rob Subbaraman, regional economist at Lehman Brothers in Tokyo. "But there is still a lot of risk out there, especially on the external side."

Scattered signs that the bottom has been touched in the crisis which caught fire in July last year sparked recent rallies in regional stock markets, but many investors seemed to lose their nerve as this weekbegan.

Hong Kong and Singapore shares surged on Tuesday, but falls in Tokyo and Seoul underlined the fragile Asian sentiment.

"I think we may be at the bottom in terms of the deterioration of the deterioration," said Graham Courtney, an economist at Warburg Dillon Read.

"But is it going to turn around? The short answer is `no', because domestic demand has proven to be incredibly weak...and external demand stimulus is not there."

Economists seeking clues to recovery stress that painting the region with a single broad brush would be a big mistake, given that the pace and timing of recovery is certain to vary.

"I think what we will be seeing is a growing distinction among the Asian economies," Subbaraman said. "It would be best to use the term `Asia' sparingly."

Among the nations which were targets of International Monetary Fund-led bailouts, Thailand -- which led the way into the crisis -- could lead the way out, Subbaraman said, pointing to Bangkok's easier monetary and fiscal policies and fallinginterest rates.

"And they've been ahead of the curve in terms of implementing IMF reforms, and that is starting to bear fruit," he added.

Others said South Korea, despite its corporate restructuring woes, could give Thailand a run for its money.

"At the moment... Korea and Thailand are about neck and neck," Courtney said. "I'm not that convinced that Thailand is coming out faster than Korea, because the Korean currency stabilised before Thailand."

Indonesia is lagging behind because of its late start on implementing reforms, the depth of its structural problems, and the severe damage done to investor confidence by the economic and political turmoil, economists said.

Malaysia, meanwhile, is likely to return to growth in 1999 after shrinking this calendar year, but economists fear the expected recovery will be neither healthy nor sustainable.

Kuala Lumpur on Friday presented a stimulative budget which said the economy would grow by one per cent next year after a 4.8-per cent fall this year, but saidthe nation's budget deficit would rise to 6.1 per cent of GNP in 1999 from 3.7 per cent in 1998.

"It looks good... but it's not going to be quality growth," Subbaraman said. "It's going down a dangerous path of reflation but not reforming the economy." Doubts about Japan, which accounts for some 70 per cent of Asia's gross domestic product (GDP), still haunt the rest of the region despite some signs that a banking sector cleanup and more aggressive fiscal policies may finally end the prolonged slump.

"So much of how quickly these countries recover depends on how the Japanese handle their situation," said William Belchere, head of currency and fixed income research at Merrill Lynch in Singapore. "I'm pretty negative on them, but some people are giving them the benefit of the doubt."

Should Japanese banking reforms falter, as they have before, renewed weakness in the yen could set back regional recovery.

"If yen/dollar goes down to 170, Hong Kong is back into deep recession and China becomes even moreproblematic," Belchere said, adding that Merrill Lynch has forecast a return to 160 yen to the dollar over a 12-month period.

Slowdowns in the United States and Europe are also big wildcards for Asia, casting doubt over the sustainability of returns to current account surpluses, which have been fuelled by a collapse in imports rather than export growth.

"These are small, open economies. Part of their success instabilising has been the massive turnaround in the current account from deficit to positive, but there's been no export growth. And if exports can'T grow a second year, it puts even greater pressure on the external side," Belchere said. Longer-term, crisis-hit economies still face huge challenges tackling the structural reforms needed to underpin sustainable recoveries. "There are still serious structural issues," said Toru Kusukawa, chairman of the board of councillors of Fuji Research Institute. "I'd put the possibility of a turnaround at 10 per cent -- until now it was zero."