Investors pierce Japan's data gloom

ANXIOUSLY awaited data on Japan's economic recovery today failed to clarify whether the optimism of recent months is something more permanent.

While industrial output rose a robust 3.4% in January, helped by strong growth in exports - particularly consumer electronics - unemployment is rising and deflation, which many economists thought was beaten, is stubbornly persistent. The authorities were cautious about the coming months.

'We have not changed our basic view that the economy is recovering steadily,' Economics Minister Heizo Takenaka told reporters, before going on to caution against too much exuberance.

Japan's jobless rate edged up from 4.9% in December to 5% in January and there are signs recent economic growth may be peaking. Manufacturers' output - a key component and close proxy of overall industrial production - is expected to fall 4.1% in February and rise 0.7% next month.

The Reuters/Nomura/JMMA Purchasing Managers Index for manufacturing eased to 54.6 in February from 55.7 in January.

While retail sales may be up, prices are still down. The consumer price index fell 0.1% in January from a year earlier, after a 0.7% decline in December. Still, investors were determined to put the best light on the figures, and the Nikkei 225 Average closed up 226.63 points to 11,041.92, up 2.1% - its biggest rise since 15 December last year.

Property companies performed strongly, with Mitsubishi Estate, the country's biggest developer, rising 6.5% to 1279 yen. Retailers also performed well, with 7-Eleven putting on 4.6% to 3450 yen. Electronics firms were generally better, with TDK up 2.4% at 7570 yen, Sony rising 0.45% to 4420 yen and Sharp adding 1.5% to 1812 yen.

But investors were unimpressed by Fujitsu's plan to build a microchip plant. While this might show admirable confidence that the market is turning the corner, reports it would cost around 160bn yen (£784m) led to doubts the debt-laden company could afford the optimism. The shares fell 0.45% to 660 yen.

Bargain-hunting was the order of the day in Hong Kong where the Hang Seng zoomed up 171.68 points at 13,788.9. The market is awaiting guidance from banking giant HSBC, due to report on Monday. Its shares were flat at HK$127.00, close to last week's record high HK$128.50.

Meanwhile, the enthusiasm for overseas listings remains unabated, with Huadian Power International, formerly known as Shandong International Power Development, reportedly planning to raise US$4.8bn (£2.6bn) in a Wall Street share sale.

China's third-largest power producer has said it will spend 40bn yuan (£2.6bn) - the amount it is seeking from the share sale - over the next eight years to quadruple capacity. The shares fell 0.85% to HK$2.93

In Sydney, the All Ordinaries was up 14.4 points at 3372.5 on better-than-expected results. It has been a week of good news from insurers and Suncorp Metway was no exception. Its 81% rise in first-half profit helped it add 3.5% to A$13.56.

Singapore shares reversed early gains, with the Straits Times Index down 0.73 points at 1887.97. Asia's second-largest property group City Developments shares rose a fraction to S$6.75 after proposing a special dividend, but only if shareholders approve a S$537m (£169m) capital raising.