Asia stocks slip with focus on grim outlook

Asian stocks slipped on Monday in choppy trade, despite some buying of Japanese shares by long-term investors, on expectations corporate results will reflect deteriorating economic conditions until at least the second half of 2009.
Major European stock markets were expected to open as much as 1 percent lower, according financial bookmakers, while U.S. stock market futures were slightly higher after a sharp sell-off on Friday.
Oil prices dipped to within striking distance of last week's 22-month low after policymakers from both emerging and developed economies who met in Washington chose to leave individual governments to tend their own backyards and did not propose a global response.
Many economies were buckling under the worst financial crisis in a generation, with a report on Monday confirming that Japan has joined a growing list of economies sliding into recessions.
Despite mostly sound fundamentals, markets are essentially pricing in a re-run of the 1997-1998 Asian financial crisis, worried about the region's reliance on export-driven growth and trade financing.
"This means that export-dependent Asia is facing a double whammy just at the wrong time: an already weakened external demand is being constricted by tight credit conditions," United Overseas Bank economists said in a note.
"If history repeats, this would suggest that Asia should see a fairly challenging first half of 2009 as the momentum of declines gathers speed," they said.
The MSCI index of Asia-Pacific stocks outside of Japan .MIAPJ0000PUS fell 1.75 percent, extending last week's 9.7 drop. Year-to-date losses have piled up to around 57 percent.
Hong Kong's Hang Seng index was little changed in choppy trade, with shares of Hong Kong Exchanges & Clearing one of the biggest percentage losers as investors expected withering volumes to hurt the company's bottom line more.
Airline stocks such as Air China, China Eastern Airlines and China Southern Airlines rallied on hopes they will get government cash injections to cope with high costs and weak demand.
Tokyo's Nikkei share average recovered from early losses, edging up 0.7 percent, as the yen fell and as public pension fund managers snapped up cheap stocks. Some of the stocks lifting the index, such as Takeda Pharmaceutical, were so-called defensive plays, which were expected to perform relatively well in a slowdown.
STOCKS CHEAP BUT DEMAND THIN
Many analysts were not predicting a near-term improvement in market sentiment. Financial markets and economies remained locked in a vicious circle, with weakness in one affecting the other.
Equity capital flows into developed markets over the last month were at near record lows, according to State Street Global Markets analysts. Savage selling in global stock markets has made prices very cheap but investors have not judged the coast clear enough to buy wholesale yet.
"State Streets analysis of the long-run price-earnings multiple suggests valuations are now at levels only seen in extreme periods of dislocation such as the hyperinflationary 1970s and World War Two. However, stocks can stay cheap if there is no demand to buy them," the analysts said in a note.