Markets tread water over US doubts

FEARS that US consumer confidence is beginning to crumble left Asian markets treading water.

The Nikkei 225 gave up much of yesterday's 3.5% gain and lost 121.993 points (1.26%) to close at 9877.94. In Hong Kong, the Hang Seng index struggled to gain 112.11 points to close at 10,267.36.

Regional markets also continued to be hit by re-balancing by international investment funds overweight in Asian markets after a strong performance at the beginning of the year.

Heavy redemptions of mutual funds in the US have also put pressure on managers to take profits, adding more volatility to markets, said analysts.

'There are a lot technical factors at play,' said Angelo Corbetta, head of Pioneer Investments in Singapore. 'A lot of US fund managers are switching out of Asia and into Europe and the US at the moment as they find their relative weightings have changed.'

Hopes that big investors will be pulled back into Asia by reviving prospects for local exporters went on hold after the latest index of consumer confidence issued by the Conference Board showed its biggest drop in nine months.

Lacklustre quarterly earnings figures from Japan's consumer electronics groups and chipmakers, and a move up by the yen, also pushed share prices down. Chip stocks were also hit by a gloomy forecast from US group Nvidia, whose products power Microsoft's X-box video games console. Nvidia shares crashed 23% after it reported an unexpected fall in sales.

As most Hong Kong stocks hovered uncertainly, the locally-quoted shares of China's major brewer, Tsingtao, soared 12% after the company reported a 50% gain in profits in the first half, boosted by the World Cup. The shares were further boosted by news that Anheuser-Busch is planning to invest in Tsingtao.

In otherwise quiet trading, HSBC Holdings edged up 25 cents to HK$88 ahead of interim figures expected next week.

Chip woes in Taiwan were compounded by disappointing earnings from United Microelectronics, which warned of cuts in investment. The stock's tumble of 2% also dragged down rival Taiwan Semiconductor, and the Weighted Average lost 39.11 points at 4965.93.

South Korean stocks managed to shake off the electronics blues after modest overnight gains on Nasdaq, and the Kospi reversed early losses to show a net rise of 1.21 points at 725.29.

There were no doubts about the readiness of Australian consumers to keep spending as retail sales in June jumped 0.9% month-on-month, well ahead of market expectations. The bounce made still-higher interest rates later in the year almost inevitable, and the All Ordinaries index edged up 2.1 points to 3032.6.

Solid earnings from local chip-related companies in Singapore offset some weakness in bank shares to leave the Straits Times index up 0.35 at 1517.07.

Other South East Asian markets showed similarly tepid performances, Malaysia's Kuala Lumpur Composite up 0.4 to 722.3, Thailand's SET index marginally ahead at 374.45, up 0.37, and in Indonesia the Jakarta Composite index was down 1.93 points at 460.89.

Prices and indices in this section are from various sources and calculated at different times and may not always match those elsewhere on the site.