World markets bullish as Y2K fear ends

World markets bullish as Y2K fear ends
NICK EDWARDS

HONG KONG, JANUARY 3: Asian asset markets shrugged off potential millennium bug chills on the first day's trade in 2000, remaining infected instead with the high-tech stock fever that had sent shares soaring to record levels in 1999. Technology and communications plays drove stocks in Hong Kong and Singapore to fresh highs and a bug-free rollover pushed Malaysian shares up, while Manila was the blot on Asia's trading landscape, where half the markets were closed for public holidays.

European share prices followed Asian stocks to new peaks on Monday as apparently bug-free markets encouraged investors to press on with last year's rally. The Frankfurt, Paris, Milan and Helsinki stock markets all hit record highs in early dealings after new peaks were set overnight in Hong Kong, Singapore and Bombay. "From 0600 (0500 GMT) all Paris bourse derivatives and share markets were operating normally," the Paris exchange said.

Singapore's Straits Times Index (STI) shot up four per cent to a record close of 2,582.94 onMonday, with technology stocks among the key gainers as investors celebrated a thus far apparently trouble-free rollover from 1999 to 2000. A similar story unfolded in Hong Kong's Hang Seng, up 2.4 per cent on the day with nine of the 10 biggest movers having a high-tech or communications angle.

"The Y2K issue has proven to be a non-event and people can get on with the job of buying equities," Steve Brice, senior treasury economist at Standard Chartered told Reuters Television. "It seems that's the way to go at the moment and you almost seem to be a fool if you stand in the way of it," he said.

Despite fears of a possible correction in US stock markets in the months ahead and worries technology stocks are vastly overvalued, demand will keep prices ticking higher, said Andy Xie regional economist at Morgan Stanley Dean Witter in Hong Kong.

"The big market correction is going to come probably this year, probably in the tech sector. But afterward, still, services and IT will be the ones leading the marketup," he said. "Despite the high valuations it would be a mistake to stay away from these sectors and invest in the traditional stocks (in Asia) that we have had in the past few years," he said. And even if there was a Nasdaq correction or a series of US rate hikes, Asia would feel only limited impact, Xie said.

"We think that there could be three rate hikes this year,that would take some sting out of the Nasdaq. That would mean for us that our markets are going to trade up less than last year, not going down, but going up less than last year," he said. Britain said on Monday that the country was functioning smoothly though it remained on the alert. The government's Millennium Centre issued its statement 24 hours before Britons return to work on Tuesday after the long weekend holiday.

In France, battered by severe storms in recent days, power, telecommunications, transport and food distribution were working smoothly on Monday. "Everything is going well and we have no problems this morning," said aspokeswoman for Electricite de France. By the third day of the new year there was such a striking absence of major problems that some were wondering whether the Y2K fuss had been justified.

Communist-run Cuba even suggested the millennium bug was a capitalist plot to boost spending on computers. "The chaos that had been predicted was merely a scare," said Cuba's Juventud Rebelde (Rebel Youth) newspaper in an article entitled "Much Ado About Nothing".