Asia's major stock markets weakened over the past five days after regional currencies strengthened against the dollar.

Hong Kong's main share index saw volatile trading this week with sharp losses Monday followed by a three percent gain Wednesday. Continuing gains early Friday saw the Hang Seng end the week nearly 3 percent higher at 11,290.

Traders say investors returned to the market midweek because there are signs the territory's persistent deflation will end by 2004.

Morgan Stanley equity strategist Norman Villamin forecasts further gains for Hong Kong's main share index before the year's end. "We've seen about a 20 percent rally in Hong Kong equities in the last couple months, leaving much of the good news priced into Hong Kong," he said. "In terms of year-end, on the Hang Seng my feeling is from here, 12,000 [point level], much beyond that and we would turn even more cautious on Hong Kong."

Losses on South Korea's Kospi index accelerated on Friday as institutional investors pulled out of the market. It finished the week below its key 600-point level for the first time in two months, closing Friday at 697, almost 7 percent lower than last week's close.

Taiwan's weighted index closed about 2 percent lower this week at 5,650. Electronic shares saw some of the greatest declines.

Japan's Nikkei 225 made a small rebound Friday after three days of losses. However, it closed 5.5 percent lower on the week, at 10,318.

Investors began selling shares of Japanese export companies Monday on worries exports would become more expensive and less competitive following a sharp appreciation of the yen to the U.S. dollar.