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HONG KONG, Dec 25 (AFP): Asian stocks defied a gathering storm of negative factors and rallied throughout 2005, triggering hopes the markets and investors will shortly see a return to the opulent heights of the late 1990s.
Easing economic growth, rising inflation-aggravated by historically high oil prices-and regional central banks hitching their tails to the US Federal Reserve's pursuit of tighter monetary policy failed to brake the exuberance.
Instead, it was global commodity prices and the break-neck pace of economic expansion in China and to a lesser extent India which commanded attention.
Iron ore, oil, gas, coal, copper, aluminium and gold topped the shopping list for investors chasing rich returns. The knock-on effect boosted property markets, financial and trading houses, and banks.
Most importantly the mighty US dollar, by far the favourite currency of international traders, surprised everyone and rose, boosting Asian exports and thus underpinning the region's vast manufacturing sector.
Sydney, Seoul, Wellington and Mumbai repeatedly broke record highs. Tokyo, after a massive late year rally struck a five-year peak. Taipei and Singapore were solid. Hong Kong, Jakarta and Manila registered only modest gains.
But perhaps the most striking feature was a cementing of investor confidence in a region that had struggled since the 1997 financial crisis heralded a bleak era of recessions, and economies hobbled by SARS, conflicts and calamities.
Credit Suisse First Boston sees Asian economic growth, excluding Japan, at 7.5 per cent and the Asian Development Bank at 7.2 per cent in 2006, compared with an estimate of about 7.1 per cent for the year just ending.
Whether that can be maintained against the Achilles heel of equities-inflation-in the coming year, has left dealers guessing if there is enough upside for an Asian return to the fast and freewheeling days of unparalleled wealth that preceded the crunch.
"My taxi driver was discussing stock ideas this week," Tony Raza, a research analyst at Merrill Lynch said of the Singapore market.
"It's been a number of years since Singapore has enjoyed a steady buzz of retail investor enthusiasm," he noted.
Fashion magazines in Hong Kong also seem to think so, recently noting that upscale female hemlines in Asia-a fanciful barometer of economic prosperity that emerged in the US during roaring 1920s-are rising at a faster rate than the territory's Hang Seng index.
That would put the Hong Kong's stock market benchmark on a footing to crack its historical peak of around 18,000 points.
Hong Kong is currently trading about 15 per cent shy of that high and a boom here coupled with a widely anticipated rally in Tokyo, where Asia's largest economy appears to be exiting a decade long rut of deflation, could further inspire the region.
In particular, the region's laggards, Bangkok and Kuala Lumpur, which struggled throughout the year and ended flat, potentially would stand to benefit most, with foreign investors increasingly looking for alternative markets to park their cash in.
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