Bad-debt nerves put Nikkei in spin

A STRING of upbeat earnings results from mainstream US companies failed to lure Asian investors back to the markets today.

Tokyo stocks tumbled ahead of a key report later today by a task force set up to handle Japan's bad-debts problem.

The Nikkei 225 Average dived 289.02 points to close at 8689.39 despite signs that the economic recovery continues to splutter ahead.

The All Industries index, which closely tracks gross domestic product rose 0.5% month-on-month in August, easing fears of another plunge into recession. This improvement was cancelled out as technology shares throughout the region were hit by a fourth-quarter profits warning from Texas Instruments.

The warning was issued after hours in New York, where the Dow Jones Industrial Average had continued its bull run and powered ahead by 2.6% to a six week high, led by Coca-Cola and McDonald's, while the Nasdaq advanced 1.7%.

In Japan, the task force interim report from the team led by Economic Minister Heizo Takenaka is expected to outline plans for tackling the 52 trillion yen (£270bn) of bad debts threatening to swamp the economy. Traders fret that in the short term, Takenaka's proposals will prove a lose-lose situation.

If he fails to present sufficiently strong measures, the outlook for the economy will stay dark, say analysts. A strong package would be welcomed by international bankers and investors but would lead to a rapid rise in bankruptcies and higher unemployment.

The whistle-blowing by Texas instruments confirmed that any technology recovery would come company by company rather than as a uniform wave of growth across all sectors. Losers in Tokyo included chip giant NEC, down more than 5%, and Toshiba, which is big in chips as well as computers, down more than 4%.

In South Korea the Kospi fell 11.46 points to 641.21 as telecom-related stocks reeled from the warning from TI, which specialises in mobile phone components. Banks fell ahead of a batch of third-quarter figures expected to show bad debts are piling up on their credit card business.

An early rally in Taiwan quickly faded as shares in chip companies sank ahead of quarterly figures. The Weighted Average lost 60.93 points to 4402.89.

In Hong Kong, buying inspired by Wall Street quickly petered out, leaving the Hang Seng index up a mere 12.69 points at 9583.05 by the midday close.

China-based mobile phone companies held gains as analysts pointed to their strong cash positions compared with other highly geared networks around the world. Sydney shares rallied from yesterday's losses as bargain-hunters came back in and lifted News Corporation and other blue-chips. The All Ordinaries index closed 12.9 points up at 2960.7. Insurance Australia Group fell 2.5% to new lows on disappointment with the terms of a share issue to raise funds to buy Aviva's local business.

Singapore's Straits Times index eased back 1.28 points to 1456.43, and Malaysia's Kuala Lumpur Composite index dipped 0.4 to 652.37, but Thailand's SET index continued its week-long rally with a gain of

1.23 points at 345.51. In Indonesia, the Jakarta Composite index fell 6.51 points to 355.36.