Nikkei springs to life on hopes for banks

JAPANESE banks bounded back from the dead today as investors bet the Tokyo government would try to save face at this weekend's Group of Seven summit in Ottawa by pledging to tackle the bad loans crisis.

Gains ranged up to 20% as the Bank of Japan started a two-day meeting which could result in the liquidity being pumped into the economy.

The buying brought a dramatic reverse to the week-long slide in Japanese stocks as the Nikkei 225 Average recovered more than 2% to 9635 in mid-morning trade, before settling down to 9583.27, a gain of 162.42.

Dealers were caught by surprise as Mizuho Holdings, the world's largest lender, rallied from recent record lows with a near-20% surge, and other major banks followed with doubledigit percentage gains.

'Even dead cats bounce,' said one commentator, who warned that the market was only weeks away from what is certain to be a grim list of annual bad debt figures from the sector.

There was little relief from the recent attack of bearishness in Hong Kong, where the Hang Seng index fell 182.7 to 10,409.7.

With investors in pessimistic mood, even the Allied Irish Banks fraud case had an impact, as HSBC Holdings shares led the sector down with a HK$1 fall to a new 2001 low of HK$85 on overnight weakness of European banks.

Other blue-chips stumbled as investors backed away from the market, nervous of holding stocks over the long Lunar New Year holiday. A 7% slump in mainland computers giant Legend Holdings added pressure to the market after analysts warned that recent gains had left the stock way above fair value.

South Korea's regular bounce off the ropes failed to materialise as investors backed off from the long holiday period. Signs of increasing tension with communist North Korea outweighed positive economic news.

The Kospi lost 13.84 to 727.71 as profit-taking set in and Hynix Semiconductor faded on reports that the US Micron group is demanding cash injections from creditors before it signs any deal.

Inchcape's S$138.4m (£53m) offer to snap up the outstanding 37% stake in its Singapore motor trading offshoot Inchcape Motors sent shares in other car dealers racing ahead. Inchcape Motors' shares in Singapore were suspended, but Mercedes Benz dealers Cycle & Carriage and other franchisees of major makes climbed as much as 4%.

The gains failed to help the Straits Times index, which was pushed down 26 to 1722.6 by local blue-chips and electronics stocks on Wall Street weakness and earnings fears. Wall Street woes also depressed shares in Sydney, where News Corp was the main drag on the All Ordinaries, which lost 9.8 to 3358.8.

Profit-taking among resources stocks added to the weakness, while a Deutsche Bank downgrade of Macquarie Bank on poor earnings prospects sent the stock sliding by more than 4%.

Hopes of a traditional pre-Chinese New Year rally in Malaysia were dashed as profit-taking took the Kuala Lumpur Composite down 8.96 to 706.26. Thailand's SET index eased 1.14 to 347.03, and the Jakarta Composite slid 6.43 to 439.77.

Taiwan's markets were closed for Lunar New Year holidays.

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.