A rally in Asian stocks could run out of steam as mid-October marks the start of company earnings reports across the region, while investors may find it harder to ignore the risks of record oil prices and a weaker dollar.
Strong economic growth at home and the prospects of more U.S. interest rate cuts have spurred on gains in the region, with the broad MSCI Asia ex-Japan stock index hitting a string of records to gain about 12 percent in September, its strongest month in eight years.
Although the rising trend is likely to remain intact -- with the index rebounding some 32 percent since its low in mid-August -- analysts warn caution is slipping in amid signs of a weakening economy in the United States, the region's top export destination.
China, which is becoming another key export destination for the region, is on holiday for the whole week, potentially sapping some momentum in markets such as in Hong Kong and South Korea.
"Relative to what we've seen so far, stock markets should be quiet as we are heading to the earnings reporting season," said Kim Joon-hyun, an analyst at Goodmorning Shinhan Securities in Seoul.
"Record oil prices are still a big concern for stock markets, and a weakening of the dollar is not a positive development for exporters," he added.
The dollar has recently hit record lows against the euro and a basket of currencies, raising worries that continued weakness in the greenback will eat into profits earned abroad by export-dependent Asian companies.
Oil prices , also at record levels, are another concern, even if some resource stocks have so far benefitted, as they have the potential to slow consumer demand in key global markets.
"Investors will really have to tighten their belts and wear helmets because a sharp correction in the short-term is not ruled out," said Gajendra Nagpal, chief executive of Unicon Financial Intermediaries in Bangalore, India.
<------------- Better be cautious when it comes to mid Oct
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