SINGAPORE, Nov 17: The past month’s stock market rally across Asia is risky because it is driven mainly by liquidity in a sea of faltering economies, Dutch bank ABN Amro says in a report.

Cash-rich foreign fund managers have been the key players so far, with more cautious domestic investors largely sidelined.

In the current tug of war between liquidity and fundamentals, liquidity has the upper hand, ABN Amro said in the report received here Saturday.

The liquidity-driven rally may last for a while, given the current momentum. But we would like to emphasise that this is a risky game and there is no guarantee when the music will stop.

We are very concerned about what will happen when it does, the bank said, stressing that the fundamentals remain bad as key regional economies sink deeper into recession.

Stock indices in Asia’s key markets outside Japan have been sizzling since last month.

Hong Kong’s Hang Seng index closed at 11,287.37 on Friday, up 14 percent from the first trading day in October. The Taiwan Stock Exchange index finished at 954.5 on Friday, up 27.33 per cent from October 2.

The Straits Times index in Singapore closed at 1,422.17 on Friday, gaining 6.7 per cent from October 1.

South Korea’s composite index was up 22 per cent and India’s BSE sensitive index advanced 13.8 per cent in the same period.

The bank noted that the money came largely from foreign fund managers unloading cash before the year-end holidays.

Locals have not joined the foreigners in their buying binge yet as they are more wary of the continuing sharp deterioration in regional economies and investment confidence, it said.

For 2001, ABN Amro is forecasting HK’s economy to contract 0.2pc, Taiwan by minus 2.7pc, Malaysia to shrink 0.4pc and Singapore to 3.2 pc.—AFP