The pent-up demand and continuing bullishness in technology stocks drove share prices sharply higher on three of the four markets which opened Monday. Some of the best-prepared markets, including Tokyo and Sydney, are closed until Tuesday, but some smaller bourses, where trouble was considered most likely to strike, reported a problem-free start to 2000.

In Hong Kong, the biggest Asian market to open its doors Monday, investors brushed off Y2K fears with a decisive 2.4 per cent rally that took the Hang Seng index to a new record close. The failure of the millennium bug to send the Hong Kong stock exchange into chaos left high-tech stocks free to continue their meteoric rise which has spurred trade in exchanges region-wide. "At the moment it just isn't an issue," said David Lui, research director at Schroder Investment Management.

"The issue had been properly addressed and everybody here was well-prepared."Other dealers said there was relief over the uneventful start to 2000 and predicted a bullish month ahead for Hong Kong counters. In Singapore, which also racked up a series of record highs in the dying days of 1999, the market barometer, the Straits Times Index, shot up 2.7 per cent in morning session.

Malaysian share prices were 2.3 per cent higher in morning trade after computer problems failed to materialise. "The main thing is trading has gotten off well; no glitches at all, very smooth," a dealer at a local brokerage said. "We are not out of the woods yet. But for now the indications are pretty good." Share prices on the Bombay Stock Exchange surged more than five per cent as trading for the new millennium began.

"The market is euphoric at the start of trading for the new millennium. The rise is across the board," said dealer Ashwin Kedia at domestic brokerage Alchemy Equities. "Everything is up, across the board."

In the Philippines, brokers were heartened by the smooth start to the year but noted that while all systems were go, many market participants had decided to extend their holiday break for another day. "Actually, nothing much happened in the market today," said Oliver Plana of Asiasec Equities, as the bourse slipped slightly in early trade. Sharp gains were also forecast on the Asian markets readying themselves to open on Tuesday.

In Japan, 12 brokerage houses performed final checks after fixing millennium bug glitches, just a day before the Tokyo Stock Exchange opens for 2000. The online transaction system's developer, Nomura Research Institute, said the tests were repeated after the brokerages experienced a problem with automatic order processing.

"We conducted the second test to check order processing and connections with the TSE, but there were no problems with the systems today," said spokesman Yoshihisa Ikeguchi. In South Korea, analysts said investors were expected to leap back into the stock market, extending its meteoric rise during the end of last year. "Investors who sold stocks due to fear of Y2K-related problems are expected to return with abundant liquidity," said LG Securities analyst Kim Jung-Kon.

Trading on the Australian Stock Exchange was also expected to commence smoothly after the bourse successfully cleared the millennium hurdle in test sessions. The banishing of the bug and a large number of people at their desks for this time of year was also likely to see the market busier Tuesday than previous years, said ASX spokesman Gervase Greene. "A lot more people are at work after not going away because of the Y2K bug," he said. Stock exchange authorities and brokers in Taiwan and Thailand also expressed confidence Monday that stocks would rally as computer bug concerns receded.

"The Y2K issue has proven to be a non-event and people can get on with the job of buying equities," Steve Brice, senior treasury economist at Standard Chartered told Reuters Television. "It seems that's the way to go at the moment and you almost seem to be a fool if you stand in the way of it," he said. Despite fears of a possible correction in the US stock markets in the months ahead and worries technology stocks are vastly overvalued, demand will keep prices ticking higher, said Andy Xie regional economist at Morgan Stanley Dean Witter in Hong Kong.

"The big market correction is going to come probably this year, probably in the tech sector. But afterwards, still, services and IT will be the ones leading the market up," he said.

"Despite the high valuations it would be a mistake to stay away from these sectors and invest in the traditional stocks (in Asia) that we have had in the past few years," he said.

And even if there was a Nasdaq correction or a series of US rate hikes, Asia would feel only limited impact, Xie said.

"We think that there could be three rate hikes this year,that would take some sting out of the Nasdaq. That would mean for us that our markets are going to trade up less than last year, not going down, but going up less than last year," he said. The recovery of domestic Asia demand would also help insulate the region's economies from any slowdown in the US economy, or a rise in interest rates there, said Sadiq Currimbhoy, Merrill Lynch Securities' strategist in Hong Kong.

"We're optimistic that regional growth will be sustained and will be self sustained. For the first time we're seeing domestic demand indicators starting to recover, it's not just exports," he told Reuters Television."That should mean that even if the global environment is not that supportive in terms of growth or liquidity...we have our own liquidity because of current account surpluses and we have domestic demand recovery," he said.

Currimbhoy said the missing component of the recovery picture, credit growth, would re-emerge later in this and see a strong upturn in 2001 across the industrial spectrum. That would be a bullish indicator, boosting cash flows and aiding economic growth.

"We're overweight on South)Korea going into 2000 and we've been bullish there for a year and a half now. One reason for being so is that free cash flows, cash flow after capital expenditure...we think are going to rise by 86 per cent in the year 2000," he said.