Sony in freefall on earnings shock

TRADING screens flashed red across Asia today on a cocktail of negative news: dismal numbers from Sony; more gloom on Sars; bad macro-economic data; and rekindled fears about Pyongyang's nuclear threat.

There were, for good measure, a couple of warnings from ratings agencies thrown in. In all it was a powerful - if unpleasant - brew with which to end the week.

Although Japan's Sony, the consumer electronics giant, remained in the black in the full year to March, larger than expected losses for the final quarter and a sombre outlook sent shock waves through investors.

Its glum statement, which came after the close of Asian trade yesterday, sent the shares into freefall. Sony's American Depositary Receipts slid $4.08 or 13% to $27.25 overnight, and today it was offered limit down, 600 yen or 13% lower, at 3,220. But there were no takers at that level, so the shares remained untraded.

Analysts were stunned by January-to-March red ink of £582m, compared with a loss of £287m in the year-ago quarter. Sony said in the current year it foresaw group operating profit of £680m; some analysts had pencilled in figures 2.5 times as large.

The company blamed slackening demand for its mainstay products, and added that it expected competition to intensify even as the wider economic backdrop remained bleak. Executives said there was further costly restructuring in store for its key electronics division.

Other companies were caught in the downdraught. Among the losers car maker Honda - which presents results after today's close - slumped 200 yen or 5.6% to 3,650. Advantest, which makes equipment used to test computer chips, was down 190 yen or 4.9% to 3,880.

The selling battered the Nikkei 225 to yet another two-decade low as it shed 155.60 points to close at 7699.50. The downward pressure was reinforced by figures showing a climb in Japan's jobless rate to 5.4% last month from 5.2%, and a 42nd month of deflation.

Fitch Ratings set a downbeat tone in Hong Kong, cutting its sovereign ratings outlook to negative from stable as the bug hammered business. Moody's said the government's target for a balanced budget by 2007 was in tatters. Shares dipped to another four-year low, led - as has become common - by Cathay Pacific Airways. Its shares sank 20 cents or 2.3% to HK$8.30. UBS Warburg now reckons net losses this year will hit £145 million and the shares will drop to HK$7.50.

Banking group HSBC was HK$ 1 easier at HK$81.75, dropping 1.2%. Shares in minnow lender Wing Hang Bank, partowned by Bank of New York, lost 50 cents or 2% to HK$23.85 after it said consumer loans were off 20% because of the Sars virus. The Hang Seng index retreated 92.9 points to 8349.21 points, a decline of 1.1%.

South Korean tech giant Samsung Electronics announced plans to plough a further £314m into a US chip plant, but that was not enough to stop its shares dipping 7,000 won or 2.4% to 87,500.

The world's largest memory chip maker found itself - like the rest of the market - clobbered by reports that North Korea had admitted to possessing nuclear weapons. The Seoul Composite fell 27.6 points or 4.2% to 563.59.