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Asian Investors Pessimistic Amid Fears of Interest Rate Hike - 2004-06-18

Asian market investors remained pessimistic this week, in anticipation of possible interest rate rises in both the United States and China. Hong Kong's Hang Seng index market started the week on a bad note, plunging 2.5 percent, as investors sold on fears the United States might raise interest rates sharply later this month. Hong Kong's currency is pegged to the U.S. dollar, so the city's interest rates are likely to follow U.S. rates higher.

The Hang Seng Index closed Friday at 11,855, down four percent from the end of last week.

In addition, investors were worried about the possibility of rising interest rates in China. That concern also weighed down trading in other markets, such as Taiwan.

Adrian Mowatt, chief regional strategist for the investment bank J.P. Morgan in Hong Kong, says investors' fears are overstated.

"We think there's an impressive level of pessimism out there, and this is normally the time when one really should be buying," he said. "Asian economies are still growing strongly, as is the world economy. Companies' ability to generate earning, and, ultimately, pay dividends is very much in place."

China has kept investors guessing about its intentions, at times suggesting it may increase interest rates to keep its rapidly expanding economy from overheating. At other times, Beijing has suggested the economy may be slowing at an adequate rate.

Most Asian markets made some gains midweek, but gave up ground on Friday. Markets in Japan and Taiwan were hit by concerns about earnings prospects for electronics companies.

Japan's Nikkei index closed at 11,382 points, down more than one percent for the week over worries about the technology sector.

South Korea's Kospi index gave up more than one percent for the week, ending at 741 points.