IBM and Microsoft slow progress

A WARNING that the Asian economic recovery is moving more slowly than expected and a lacklustre outlook from Microsoft left regional markets drifting.

Investors were unsettled by the latest International Monetary Fund report, which warned that rising oil prices and a weaker yen would put the brakes on the region's recovery.

The IMF cut its forecasts for gross domestic product growth in Asia, excluding Japan, from 5.9% to 5.6%, although this still represented growth over last year's actual 5%, which was driven by growing US demand for computer equipment. The report was much more downbeat on Japan. It stood by an earlier forecast of a 1% shrinkage in GDP, and called for a supplementary budget to tackle deflation.

The IMF's grim assessment brought a retort from Japan's Finance Minister, Masajuro Shiokawa, who said he planned to tell this weekend's meeting of G7 countries that the economic outlook was brightening and the bad loans problem being attacked.

After four days of gains, Tokyo was hit by heavy selling of computer-related stocks, which took the Nikkei 225 Average down 63.72 points to 11,512.01.

Computer manufacturers Sony and Fujitsu plunged more than 3% after a warning from Microsoft that fourth-quarter earnings would not match analysts' forecasts reverberated around the region.

A sales warning from mobile phones giant Nokia hurt handset manufacturers in Tokyo. NEC fell more than 3% and network operator NTT DoCoMo dived 2.5%.

Fears that Microsoft's profits alarm will punish Wall Street today saw Hong Kong investors locking in recent gains, although the Hang Seng overcame an early loss to end ahead 35 at 11,252.2. Investors were also reminded of the slack state of the local economy by a rise to a record 7% in the number of unemployed in the territory.

South Korean stocks entered another consolidation phase and after bounding more than 80 points in six trading days the Kospi fell 13.67 to 923.94. After reporting record profits, chip giant Samsung saw its shares dip slightly as investors took advantage of its recent surge to new highs.

Taiwan stocks regained some of their recent energy, and the Weighted Average rose 60.91 points to 6,448.12.

Bank shares led the way as evidence grew that, unlike their Japanese counterparts, the major lenders were taking firm steps to tackle their bad-debt problems.

The IMF report and Wall Street worries hurt banks and other bluechips in Singapore, and the Straits Times index dipped 6.72 points to 1,730.82.

Stocks in Sydney gained but later fell back as the IMF forecast that growth this year would be 3.9%. The All Ordinaries index fell 1 point to 3,355.00.

The Enron effect sent News Corp shares down more than 2% after the company announced it was replacing Andersen as its auditor with Ernst & Young, a move which investors feared could lead to changes in the way the group's assets are valued.

In Malaysia the Kuala Lumpur Composite added 11.12 points to 798.35, while Thailand's SET index slipped 0.97 to 386.51.. The Jakarta Composite eased 2.057 points to 532.781.

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.