Greenspan's double blow hits traders

US FEDERAL Reserve chief Alan Greenspan delivered the worst of signals to Asian investors on Tuesday - no cuts in interest rates, but a gloomy prognosis on the US economy.

Despite the disappointment of no move on rates and the reinforcement of concern that a weak US economy will hurt local exporters, the reaction from investors was much more muted than the 2%-plus declines on Wall Street and Nasdaq.

The impact on Tokyo's Nikkei 225 Average was a relatively modest loss of 50.20 points to 9638.41 but the Federal Open Market Committee's warning that weakness was now the greatest risk to the economy unnerved investors in Hong Kong, where the Hang Seng index slumped 156.47 to 9943.59.

Traders and analysts were also mulling over the latest pronouncements from Stephen Roach, global guru at Morgan Stanley, who can always command a strong audience in Asia and has revised his forecast for world growth down from 5% this year to 3.4%. No region will escape the downturn, he warned, including Asia. Although the bank left its 2002 pan-regional gross domestic product growth estimate unchanged at 5.6%, the forecast for 2003 has been reduced from 5.9% to 5.3%.

The cuts will be concentrated in Greater China, including Hong Kong, Taiwan, Malaysia and Singapore, said Roach. The region remained a levered play on the US demand cycle and would be hard pressed to withstand the pressures of a weaker US macro climate, he warned. The bank also warned that Japanese GDP will fall by 0.4% this year, against earlier estimates of a 0.1% fall, and will shrink by 0.5% in 2003.

Once again Japanese exporters were the main victims of the darkening outlook, with falls in Sony, Honda and Toyota ranging up to almost 3%. Shares in investment group Softbank sank 3% as its trading joint venture with Nasdaq looked set to unravel. The Japanese group said it had no plans to liquidate the operation, but in New York Nasdaq said a decision would be taken by the end of the month.

Hong Kong companies tied to trade between China and the US were hurt by the potential slowing of demand, and suffered falls of up to 5%. Shares in China Mobile, the mainland operator that is the second-strongest stock in the Hang Seng,lost 2% ahead of interim figures due out today.

A grim view on future orders from US chipmaking equipment giant Applied Materials unsettled technology stocks around the region, but demand for domestic centred counters underpinned South Korea's Kospi index, which inched up 0.31 points to 708.94, while Taiwan's Weighted Average was lifted by bargain hunting and added 29.06 points to 4846.99.

Worries that recent strong growth in Singapore will be dampened by a slowing of US demand took the Straits Times index down 10.16 points to 1518.87, as traders dumped tech stocks and local banks.

Clouds over the global economy pressured Australian resources stocks, which led the All Ordinaries down 16.2 to 3042.1. The poorer sentiment has hit the local consumer confidence index which fell 3.9%, after a 2.7% fall last month. The Kuala Lumpur Composite index lost 1.95 to 727.34, Thailand's SET slipped 0.2 to 366.45, and Jakarta's Composite lost 3.42 to 447.55.

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.