Japan cheers 'worst over' signal

JAPANESE stocks continued to outshine Asia's other major markets today as local and foreign investors bet that the country's economy had finally reached bottom. The Nikkei 225 Average tested 10-week highs following government predictions that the recession was coming to an end, and rose 75.78 points before falling back to close at 11,856.54, a gain of 9.22.

Japanese stocks have gained 18% since the beginning of the year, and have outdistanced both Taiwan and South Korea since the Nikkei hit its low point for the year in early February. Investors in Tokyo pushed prices higher for the fifth trading day running after the government said export demand was pulling the country out of its third recession in a decade.

The forecast is supported by stronger production figures among exporters, and a significant strengthening in leading economic indicators. Analysts at Morgan Stanley in Tokyo predict that gross domestic product in the first three months of the calendar year will come in at a positive 1.3%, equivalent to an annual increase of 5.3%, which compares with an expected 1.3% decline in the financial year to end-March. GDP growth could power the Nikkei on up to 13,000, forecasts Morgan Stanley.

The improving outlook took attention away from the recent high-flying export sectors as investors moved in on domestic economy-based stocks. Stores were among today's leaders with gains of up to 5%, and there was a big rush into financial services counters, which are expected to win from increased investment activity and portfolio rebuilding. Giant stockbroker Nomura led the charge with a gain of 7% while major banks added up to 4%. Carmakers lost momentum on worries that the yen would

Taiwan, an early shooting star in Asia this year, slumped almost 3%, and has plummeted nearly 9% in three days as investors have dumped Asian chip stocks. The Weighted Average crumbled 172.44 points to 5617.4, taking it close to break-even on the year, after it had shown peak gains of about 20% last month.

Chipmakers in Taiwan and South Korea have been hit by concerns that expectations of demand for their products had been too optimistic as mixed forecasts from major US customers overtook earlier strong gains. Korean technology stocks were also hit by the strength of the won on exchange markets, which will force them to cut prices in US dollar terms. The Kospi index lost 1.95 points to 873.08.

Last week's strong climb in Sydney left investors with a touch of altitude sickness, made worse by profit warnings from property developer Lend Lease, which knocked its shares almost 10%. Profit-taking in resource stocks added pressure but the All Ordinaries index still ended ahead 31.5 points at 3393.3.

South east Asia markets edged lower, with the exception Thailand, where the SET index advanced by 1.51 points to 379.74. The Straits Times index in Singapore dropped 1.58 points to 1732.03, the Kuala Lumpur Composite index in Malaysia shed 3.86 points to 783.99 and Indonesia's Jakarta Composite lost 3.27 to 528.31. The Hong Kong market was closed for a public holiday.

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.