In all-around bad year, Asian markets emerging as biggest losers

HONG KONG - Amid a sea of red ink in the world's markets, financial losses throughout Asia stand out prominently, as if highlighted and printed in bold.

The recovery of Asia's financial markets from the crisis of the late 1990s has neither been strong nor steady. Now, coupled with the region's homegrown troubles, recent weakness on Wall Street and surging oil prices are further hindering Asia's recuperation.

To be sure, a downturn in Asian financial markets - some have shed between one-third and nearly one-half of their value - is not nearly as worrisome to the world as this year's 11 percent dip by the Dow Jones industrial average or the 18 percent drop by the Nasdaq composite index. But that is little solace to investors within Asia, who have endured plenty of pain and uncertainty, not to mention billions of dollars in losses.

The slide by the Nasdaq has been the catalyst for selloffs of formerly high-flying technology and telecommunications stocks throughout Asia. The recent rise in oil prices and turmoil in the Middle East have only served to hit prices harder.

South Korea was temporarily the darling of the investment world as Asia started to bounce back from its 1997-98 crisis, but the Seoul market has now become the region's biggest casualty, down 49 percent this year as of Friday's close.

Traders are not predicting any quick bounce back.

''I think the downside will continue, due to fears of a possible crash in the U.S. stock market and the Middle East crisis,'' said Yoon Yong-chul, an analyst at the investment bank Goldman Sachs and Co.

''Psychological factors are playing the biggest role in the market,'' Yoon said. ''In the past, when the market was making its bullish run, such factors would not have had this much impact. But investors tend to react more sensitively when the market keeps falling, making it hard to reverse the momentum.''

Despite the growth in many economies, markets are reflecting worries of a slowdown. Oil remains a huge concern, although the current prices - hovering near 10-year highs - would help some exporting nations, including Indonesia.

But expensive oil is bad news for industrialized importers like South Korea and Japan, the world's second largest economy that has been sputtering for years. Tokyo's benchmark Nikkei Stock Average has been reeling, with a loss of 19 percent so far this year.

Matthew Poggi, an economist with investment bank Lehman Brothers in Tokyo, said a $10 per barrel increase in oil prices hits Japan far harder than it would hit the United States, cutting GDP by 0.4 percentage point and pushing up inflation by half a point.

''We think that the economy didn't look very good even without this negative shock on the price of oil,'' Poggi said. ''This could have an especially negative effect on the most vulnerable part of the Japanese economy, consumer spending.''

Jitters in the high-tech sector have stirred concerns in Taiwan, whose economy is led by world-class microchip producers. Since opposition leader Chen Shui-bian won the presidency in March, domestic political worries have also taken their toll.

Taiwanese authorities recently cut the potential losses of the stock market by halving the daily limits by which shares can fall, to 3.5 percent. Taiwan restored the usual limit of 7 percent on Thursday, but one day later prices were down by 5.5 percent in a global selloff and the government stepped in and bought shares to halt the decline.

Despite such efforts, analysts say the market remains at the mercy of outside events beyond Taiwan's control.

''The government can only cushion the falls,'' said Michael McGregor, vice president of sales at Primasia Securities in Taipei.

The Taipei market finished last week at 5,876.11 points, down 30 percent on the year. Bearish analysts are looking at the 4,500- to 5,000-point range, territory unseen since Taiwan shares collapsed in 1996 as mainland China test-fired missiles off the coast.

In the Philippines, traders had been fretting over the weak economic outlook and a hostage crisis in the south only to find a new reason to sell - allegations that President Joseph Estrada received millions in payoffs from illegal gambling operators.

In Thailand, shares have lost almost half their value this year thanks to a variety of economic troubles - the slow pace of debt restructuring, snail-paced economic growth, falling consumption and political uncertainty over upcoming general elections.

''With global economic slowdown expected, it has had an impact on most emerging markets,'' said Douglas Cairns, an analyst with Nakornthon Schroder, a leading fund management company. ''We are beholden to what happens abroad. There is a bear market going on in the U.S. and Europe.''