Intel gloom hits tech Far East

A RETURN to economic growth in

Japan's gross domestic product grew by 1.4% over the three months, driven by strong exports. This ended the country's latest recession, which shrank the economy by 1.3% last year.

Although Japanese ministers welcomed the figures, economists still fretted that signs of a renewed slowing of consumer spending and a lack of investment in manufacturing industry threatened to make this one of the shortest-lived recoveries in Japan's chequered economic history. Instead of welcoming the GDP figures, Tokyo investors took their cue from the overnight 14% crash in Intel shares, Nasdaq's 2.5% drop and Wall Street's retreat to eight-month lows.

Markets in Taiwan, South Korea and Singapore also suffered after Intel, the world's largest maker of computer chips, slashed its second-quarter sales forecasts and warned that demand in Europe was falling well below expectations.

After American analysts queued up to warn that earlier forecasts of a technology recovery were looking decidedly shaky and Merrill Lynch downgraded the whole sector, traders in Tokyo and other big Asian markets headed for the exits. In a sea of red ink in Tokyo, chip-making equipment manufacturer Advantest plunged furthest, losing more than 5%. Biggest casualty among chip-makers was Toshiba, which lost 2%.

South Korean punters had their attention jerked away from the World Cup as the country's biggest technology stocks were caught in the regional meltdown. The Kospi dived 14.43 points to 795.16 as warnings from government ministers expressed doubts about the survival of debt-ridden chip giant Hynix Semiconductor, which were added to the Intel effect.

A fightback in Taiwan quickly ran out of steam and the Weighted Average ended 2.8% lower, down 158.00 to 5433.02. Taiwan Semiconductor, crashed by its daily limit of 7%, but continuing demand for shares of companies with interests in China helped to limit the overall falls. Meanwhile, Singapore's Straits Times index fell fractionally, down 0.01 to 1652.45.

In Hong Kong, Wall Street's woes inflicted heavy damage on local exporting stocks, which have been star performers this year on hopes that the US economic recovery would boost profits. HSBC Holdings, which had also been supported on hopes of a US upturn, lost 75 cents to HK$94.75, making it the biggest contributor to a 96.06-points fall to 11,284.71 on the Hang Seng index.

In Sydney global disillusionment with telecoms stocks spread to Telstra, which lost almost 0.5%, while News Corp shares followed their Wall Street equivalent down and declined 2.2%. The All Ordinaries lost 3.1 to 3295.7.

In Thailand, stocks slipped into losses at the end. The SET index fell 0.43 points to 417.33. In Malaysia, the Kuala Lumpur Composite bucked the trend and finished 2.33 points up at 755.21 while the Jakarta Composite rose just 0.30 to 514.03.