Asia shares drift on rates worry

INTEREST-rate concerns dried up trading in most Asian markets today, leaving share prices drifting as institutional investors also locked in recent profits.

The focus in Japan was not on which way the US Federal Reserve will jump, but on reports that the big banks were planning to slice their already wafer-thin deposit rates still further.

The potential benefits to earnings boosted bank shares and helped to offset the profit-taking pressure on big exporters, and the Nikkei 225 Average dropped 83.99 points to close at 11,261.09. Japan's major banks are said to be ready to slice their deposit rates from 0.02% a year to 0.01% or less in a move to discourage customers from switching accounts when a government protection scheme on time deposits is wound up at the end of the month.

The report brought buyers in for major lender Mizuho, which rose more than 2%, while UJF jumped 4%. Sentiment was also lifted by hints that tax changes to help boost the economy were on the way.

The prospect of higher interest rates in the US depressed big exporters, while technology stocks were also hit by warnings that demand for computers is not recovering as fast as had been expected. Sony led the way, sliding more than 2%.

Hong Kong investors were torn over the prospects of higher interest rates. The local currency's peg to the dollar means that rates in the territory instantly follow US moves, and with the economy still in deflation dearer money is the last thing companies want. At the same time, as the interest rate rises are a symptom of a recovering US economy, exporters can be expected to benefit.

The bad-news bears proved the stronger influence, and the Hang Seng index slipped 65.94 points to 10,797.13. Property developers, which would have their already dismal prospects further darkened by higher interest rates, led the index down with falls of up to 2%.

Quarter-end portfolio building by fund managers who missed out on Taiwan's earlier gains helped lift the Weighted Average 78.75 points to 6219.17. In Seoul, signs of political contacts being renewed with North Korea left investors unmoved, as they looked instead at the prospects of dearer money, and the Kospi edged down 14.49 points to 881.49. Singapore stocks continued to track sideways as investors digested big gains earlier this month, and analysts brooded on the speed of any recovery in corporate fortunes. Selling of big blue-chip stocks such as Singapore Press Holdings and the banks, set the Straits Times index back 2.41 points to

A dull Wall Street performance on Friday left Sydney stocks listless, the All Ordinaries index down 8.4 points at 3373.2. Resource stocks remained weak on easing commodity prices and News Corporation lost more than 1%, in line with US trading of its stock last week.

Reports in Malaysia that conglomerate Sime Darby faces the loss of its lucrative BMW car franchise sent the shares skidding more than 6%, and as institutional buying dried up elsewhere the Kuala Lumpur Composite lost 5.05 to 747.58.

In Thailand, stocks were slightly ahead, the SET index up 0.85 points at 390.16, but in Jakarta Indonesia's Composite index lost 3.46 to 481.27.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed in the tables.