Nikkei ignores Koizumi caution

THE weakening trend in the yen, and a tightening of rules on short selling, boosted

Investors ignored hints from Japanese Prime Minster Junichiro Koizumi that they should expect no dramatic moves in his plans and chased motor exporters, technology stocks and big banks.

An gain of more than 3% in the Nikkei 225 Average was quickly followed by strong gains in other Asian markets as economic growth figures bolstered predictions of a global recovery. Yesterday's slump to near three-year lows in the value of the yen against the US dollar encouraged buyers of electronics and motor stocks, which benefit from more competitive prices and pumped-up repatriated profits.

The Nikkei jumped 370.46 points to close at 10,573.09, despite a strong rally by the yen. Honda led the auto sector with a surge of more than 5%, while among consumer electronics stocks, Sony stood out with a 2% rise.

The yen's bounce was partly sparked by demand from foreign institutions buying back shares ahead of an expected tightening of rules on short selling. This followed penalties imposed yesterday by the Financial Services Agency on Bear Stearns, Crèdit Lyonnais, and Deutsche Bank for breaking existing rules. This was seen as good news for bank stocks, which have been heavily shorted by foreign hedge funds and other institutions.

Prospects that Koizumi would hurt share prices with a shot of nasty medicine faded after he warned that today's widely-leaked measures would not be a panacea for Japan's long-term economic ills.

In contrast to Japan's steady decline, South Korea's economy was bustling after output in January bounded more than 10%, and a rush for stocks took the Kospi index up 17.35 points to a 19-month high of 818.49. The ending of a strike by rail and power workers to protest against privatisation plans brought foreign buyers back into the market.

Hong Kong investors switched into growth stocks they expect to gain from a world recovery, and the Hang Seng index added 182.98 points to 10,730.11. Top China computer maker Legend Holdings led technology-related stocks higher, and HSBC Holdings continued to build on its recent rally, putting on 75 cents to HK$87.75.

A surprise 4.7% rise in Singapore's manufacturing output in January encouraged investors and lifted the Straits Times index 30.13 points to 1712.53. Bank stocks led on analysts' advice that they will do best from the recovery.

In Taiwan, a surge of 196.32 points to 5696.11 in the Weighted index was written off by traders as a technical rebound after six consecutive days of falls.

In Australia, an 8% climb in Qantas shares on news that a proposed domestic competitor had dropped out, failed to take the All Ordinaries index into the black. It lost 21.5 points to close at 3358.6 as investors fretted about poor earnings news from blue-chips.

Thai stocks rushed ahead after yesterday's holiday as foreign institutions moved in. The SET index gained 9.94 points to 366.59. Malaysia's Kuala Lumpur Composite was also firm, up 2.65 at 703.74, while Indonesia's Jakarta Composite index rose 4.47 points to 453.16.

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