Nasdaq Decline Yields Mixed Asian Markets; U.S. Capital Flight Is Expected to Benefit Europe
As the tech-stock shakeout on Wall Street continues, global money is likely to seek out better returns in markets outside the U.S. But don't expect Asia to be the big beneficiary.</br></br>Analysts suggest that any U.S. capital flight following Nasdaq's recent correction is more likely to go to Europe than to Asia. The money that does cross the Pacific may be destined largely for Japan, rather than for the smaller Asian economies that need the capital most.</br></br>Asian markets were mixed as many investors took a wait-and-see approach following Monday's Nasdaq turbulence. Renewed buying interest in blue chips led European markets higher, despite weakness in technology stocks. Latin American shares also rallied. Overall, the Dow Jones World Stock Index rose 4.07, or 1.69%, to 244.32. Excluding the U.S., the index fell 0.21, or 0.12%, to 179.35.</br></br>Amid the rise in uncertainties overhanging the U.S. market, many predict a continued shift of money abroad. "What we're seeing is just the normal process of portfolio rebalancing," says James Lucier Jr., a Prudential Securities Inc. senior analyst. "A year and a half ago you had calamity in Asia, recession in Japan and slow growth everywhere else, which made the U.S. a haven of last resort and a disproportionately hot place to invest in. The U.S. still looks attractive but Europe and Japan in some respects are looking more attractive."</br></br>Who will benefit from the outflow, however, is less clear, with some analysts noting that the flow of money into Asian stocks this year has slacked off. The share of portfolio money in the U.S. and Europe slated for non-U.S. markets has risen this year, but the share specifically slated for Asia hasn't, says Ajay Kapur, a Hong Kong-based regional strategist with Morgan Stanley Dean Witter.