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Tigers fight with bears
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December 31, 1998: 3:02 p.m. ET
Worst is behind Hong Kong, Singapore but Japan is still in trouble, say analysts
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LONDON (CNNfn) - The next 12 months could see the return of the Asian tigers. But for Japan, a recovery could be at least another year away.
That's the view of analysts across the region who forecast rallies in Hong Kong and Singapore during the next 12 months but see another grim year in Japan. The thinking is that battered Tokyo stocks will have to wait until the new millennium to witness any sort of recovery.
Tokyo's benchmark Nikkei average has had a bad year, falling 9 percent from 15,258.74 to 13,842.17. And all the signs are that 1999 could be even worse.
"Our scenario in 1999 is that 10,000 on the Nikkei is a given - 8,000 is possible," says Robert Sasaki, head of Jardine Fleming's quantitative strategy group. "We think that if the market goes to 8,000 it's good. It's not going to stay there for very long."
Sasaki dismisses suggestions that 1999 could see a recovery in Japanese stocks.
"It was hoped that with the currency at 146 or 150, exporters would bring the country out of recession," he says. "That is no longer possible. It was hoped that interest rates could pull the economy through. That is no longer possible either.
"Even when we hear the government and the International Monetary Fund speak about the prognosis for Japan they are talking about the year 2000."
But going forward, Sasaki is more optimistic. "We are going to see a lot of M&A activity from overseas joint-venture partners which will bring the market back up," he says. "By 2000 it could be back to 15,000 but we have got to go to 8,000 first."
Asia's Tiger have a brighter future
Elsewhere the picture is brighter as Hong Kong and Singapore begin to shrug off a gloomy couple of years.
The Hang Seng index has shed 6 percent from 10,722.76 to 10,048.58 over the last 12 months. But the relatively modest fall disguises plummeting business confidence. The figures also ignore the fact that the notoriously libertarian Hong Kong government was forced to prop up the market.
Nevertheless Yamaichi Core Pacific research director Alex Tang sees Hong Kong stocks recovering solidly in 1999.
"For the early part of next year it will be trapped in a narrow range," he says. "The upside will be around 11,000 and the downside 9,500 which is still a strong support area."
Tang forecasts the Hang Seng index will rise to 12,000 by the end of 1999. But it might take a little longer for a major advance as falling prices, rising redundancies and a general sense of economic pessimism still grip the territory.
"We are now in the first stage of a bull market categorized by thin volumes and a narrow range," he says. "But the bull run probably won't happen until the end of 1999."
It is a similar picture in Singapore, which is hoping to see the fruits of some tough economic austerity measures this year. Over the last 12 months, the Straits Times index has fallen 8 percent from 1,507.65 to 1,392.73.
"Overseas investors are still positive about Singapore," says Salomon Brothers sales trader Mark Julliem.
But his optimism is cautious. "I want to be bullish because it is the commercial thing to do and I'm starting to tire of being a bear," he explains.
"But I'm still skeptical. There are serious problems to be played out in Japan. The recovery will not be as full blown as the market is trying to price in. Financial assets could be players but property probably isn't as interesting as people think."
Modest rallies for Hong Kong and Singapore then, but rallies nevertheless. Investors across the world will be wishing the same could be said of Japan. 
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