Stronger yen weakens car makers

A SLIGHT rise in the yen sent shares in Japanese carmakers tumbling, despite reports from the US showing demand remained ahead of forecasts.

The yen's 0.7% recovery against the US dollar dampened enthusiasm for other exporters, and the four-day bull run by Tokyo stocks petered out, leaving the Nikkei 225 Average down 194.82 at 10,026.03.

Most other Asian markets struggled to maintain modest gains ahead of the US Federal Reserve's Open Market Committee's decision on interest rates, but the Hang Seng index in Hong Kong burst into life with a hefty gain.

Sentiment in Japan was darkened by a rise to 5.6% in the number of unemployed last month, and another fall in industrial production in the past quarter as household spending continued to contract. Electronics stocks were weakened by reports that chip and component makers Toshiba and NEC were forecasting lower full-year profits. NEC fell 2.3% and the electronics sector suffered a 1.6% loss.

Toshiba fell 1.7% ahead of news that slumping component sales had forced Japan's largest chipmaker to raise its forecast of full-year losses from 200bn yen (£1.06bn) to 260bn yen, compared with last year's profit of 96.2bn yen. Losses in the third quarter to end-December were 84.87bn yen against a profit of 11.08bn yen in the same period last year.

Reports from the US that car sales are running well ahead of estimates, defying predictions that the ending of zero-finance deals would dry up demand, failed to help the big motor exporters. Their stocks are more tied to the gyrations in the yen than car sales action in America, and Toyota fell more than 4%, while Honda lost more than 2%.

Telecommunications shares led the charge in Hong Kong after brokers raised their forecasts for China mobile phone operators, and Hutchison Whampoa stepped in with a rescue bid for the bankrupt US Global Crossing. The Hang Seng index jumped 246.8 to 11,014.2. Shares in Hutchison rose 1% after the company joined forces with Singapore Technologies Telemedia to take up to 80% of the struggling fibre optics group.

The £530m deal was applauded by technology analysts in Hong Kong and Singapore. Moderating fears of debilitating competition among China's cellphone market lifted China Mobile shares by more than 5% while China Unicom added 3.3%.

South Korean stocks struggled against poor economic news, which showed industrial production fell 2.4% in December. The Kospi lost 0.29 to 779.95. A bout of nerves over upcoming results from leading semiconductor groups wiped out recent profits in Taiwan, and the Weighted Average tumbled 161.14 points to 5846.19.

Creative Technology, the Soundblaster computer card group, continued to star in Singapore and added 3%, taking its week's gain to 30%. The Straits Times index fell 1.7 points to 1771.2.

The growing conviction that US and local interest rates have now reached bottom sapped some of the recent strength from Sydney stocks, although the All Ordinaries ended unchanged at 3382.7. The Kuala Lumpur Composite rose 3.07 to 708.68, while Jakarta's Composite, at 444.78, was up 3.22, and Thailand's SET index put on 1.14 to 338.63.

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