Shares of Asian companies including Japan Airlines System Corp and steelmaker Posco have rallied in response to lower crude-oil prices. Some investors are questioning how long the gains can be sustained.
The advance may persist in the coming week as US and UK forces attack Iraq in their campaign to topple Saddam Hussein. As the war began last week, crude-oil prices had the biggest weekly decline since the start of the Persian Gulf War in 1991.
Even so, some investors said an end to the conflict may not be enough to help spur demand for Asian products. They point to evidence such as waning consumer confidence in the US, the region's largest overseas market.
"We may see a short-term recovery in stock prices in Asia after the war, but in the longer term, one still has to be cautious about the global economic situation," said Ian Burden, chief investment officer at Invesco Asset Management (Japan) Ltd, part of a firm that manages US$333 billion in assets.
In the meantime, the war may hurt shares of Asian shipping companies such as Japan's Mitsui OSK Lines Ltd and Taiwan's Evergreen Marine Corp because they face rising insurance costs for ships bound for the Persian Gulf.
Stock markets around Asia rallied last week as Brent crude, the benchmark for two-thirds of the world's oil, fell 22 percent to US$25.50 a barrel. The decline was the biggest since the start of the Persian Gulf War in 1991.
South Korea's KOSPI index led the region's advance by rising 7.1 percent, its biggest weekly gain in five months. The country is the world's fourth-largest oil importer and buys all of its crude from abroad.
Japan's Nikkei 225 Stock Average added 2.4 percent in a holiday-shortened week, while the TOPIX index rose 2.7 percent.
Stock markets were closed Friday. Crude-oil imports accounts for more than 99 percent of Japan's oil supply, according to Japan National Oil Corp, a state-controlled company that represents the industry.
"Some countries, especially [South] Korea and Japan, are more vulnerable to oil prices," said Ambrose Chang, who oversees US$600 million as chief investment officer at Daiwa International Capital Management Ltd in Hong Kong. "That's why now their rallies should be stronger than the rest."
Chang said he's not planning to buy shares for now.
Japan Airlines, the nation's largest carrier, gained 5.9 percent last week. The company earlier this month lowered its annual profit forecast by 66 percent to ¥8 billion (US$68 million) because of lower demand for air travel.
Korean Air Co, the nation's largest airline, rallied 21 percent as jet-fuel prices fell to US$29.80 a barrel, the lowest in almost four months. The fuel's cost has dropped 29 percent in the past nine trading days.
The carrier's shares rose even as it made plans to reduce flights because of declining demand. Thai Airways International Pcl, which announced similar cuts, gained 6 percent in the week.
Australia's Qantas Airways Ltd rose 8.5 percent as the airline said it will raise fares on overseas flights by 3 percent.
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