Sluggish output rattles Tokyo

A DISAPPOINTING performance by Japan's manufacturers in April rattled nerves in

The Nikkei 225 Average sank 98.46 points to 11,837.62 after the release of figures showing that industrial production rose a disappointing 0.2% in April, well below market expectations, and badly short of the 0.8% gain in March.

The return to sluggish output raised some questions about the real strength of the economic rebound, which pushed gross domestic product growth at an annual rate of 7% in the first quarter. Since then the strength of the yen has threatened to slow the rise in export demand that had fuelled earlier rises in industrial output.

A fall in microchip making equipment was one of biggest factors in April's slow growth, although this was offset by a 1.1% gain in car production, and a 3% improvement in electronics output. Bulls had some comfort from a government forecast that manufacturing production in May would surge by 5.1% on demand for cars and electronics components, although it warned there would be a fall to less than 1% in June.

Concern about the impact of the yen, and signs of a slowdown in US consumer spending hit shares in exporters, led by Sony, and semiconductor-making equipment group Advantest. Japan's big banks continued to suffer from scepticism over their bullish profits forecasts this year after their plunge into the red in 2001. A slow recovery in the economy would see bad debts mount, wiping out any improvement in their operating profits, warned analysts. UJF, which last week reported record losses for a major bank, lost more than 1% as investors voted it the bank least likely to achieve its predicted profits.

The poor US consumer confidence outlook hit Hong Kong exporters and banks, which led the Hang Seng index down 37.92 points to 11,543.66. Shares in HSBC Holdings tumbled HK$1.25 to HK$95.25 on worries that the local economy would remain mired in deflation.

South Korea's market was squeezed by big players adjusting their end-of-month futures positions and the Kospi dived 17.90 points to 830.90. Big brokerages were also hit by the widespread banning of a score of houses from share offerings after they were judged guilty of ramping prices.

Another 7% slump in the price of China Airlines after last weekend's fatal crash sent the Weighted Average index in Taiwan down 68.44 points to 5601.09.

Takeover action dominated Sydney's market, where minerals exploration group Basin Resources rocketed 43% on a bid from Iluka Resources, but Wall Street woes weighed down the All Ordinaries, which slipped 4.3 to 3331.7. Heavy foreign buying saw Thai stocks hit new highs, and the SET index cruised up 7.56 points to 410.60.

Doubts over US consumer spending pummelled stocks in Singapore, and the Straits Times index lost 19.63 points to 1689. Malaysian stocks weakened on domestic economy concerns that took the Kuala Lumpur Composite index down 3.47 points to 757.83, but the Jakarta Composite rose 1.84 points to 515.42.