Supermarket's panic selling hurts banks

PANIC selling of shares in supermarket chain Daiei choked dealings in the stock today as investors bailed out, dismayed over the lack of real progress in turning around

While banks had slid in sympathy on concerns that their debt burden was about to get heavier, late buying of stocks which stand to benefit from a weaker yen rescued the Nikkei 225 from early carnage. It finished a volatile session off 13.07 at 10,280.25.

Daiei directors asked banks on Friday night to wipe out $3.18bn (£2.27bn) worth of debts, and the shares started at the limit-down level of 15%, which halted trading. Plans to close unprofitable stores among the chain's 280 outlets failed to impress analysts, and Daiei is seen as the latest threat to Japan's tottering banking system.

Banks with big exposure to Daiei slumped led by UJF, down 5%, and Mizuho Holdings Japan's largest bank, which slid almost 2%. The long-term weakening of the yen helped exporters. Motor makers, led by Honda, added more than 1% but consumer electronics stocks weakened on a near-3% tumble by Nasdaq.

Other Asian markets stood up well to Friday's fall on Wall Street and Nasdaq. Taiwan's Weighted index soared almost 5%, or 275.25 points to 5798.05, on reports that key local semiconductor groups were planning to shift production to cheaper factories in Shanghai and Suzhou in China.

Taiwan Semiconductor, which is said to be planning the Shanghai shift, gained 5%, while United Microelectronics was close behind on stories of the move to Suzhou.

Hong Kong's exporters followed Tokyo's lead, helping the Hang Seng index to shrug off continued weakness in HSBC Holdings.

The Hang Seng index was off by only 1.49 at 10,971.47 as buyers moved in on garment trader Li & Fung, and electronic motor manufacturer Johnson Electric. Persistent fears about HSBC's global profit prospects, and its exposure to Argentina saw the stock crumble 50 cents to HK$87.50.

South Korean shares rallied from last week's non-stop falls, and the Kospi added more than 1%, up 7.79 points to 716.26.

Biggest gains were seen among banks and financial houses on long-term expectations of economic improvements boosting profits. Technology stocks failed to share in the enthusiasm in Taiwan, and fell back in line with Nasdaq as the mixed outlook contained in last week's earnings and forecasts from US computer giants weighed down investor sentiment.

Bullish forecasts for the Australian economy boosted local bluechips, but the impact was muted by further heavy falls in News Corp stock. Predictions that the Down Under economy will be top performer in the region this year brought out buyers for banks and other domesticcentred stocks and the All Ordinaries gained 11.5 to 3342.7.

Worries that any recovery in News Corp's fortunes in the US are likely to be delayed saw the shares fall a further 2.5% after last week's hefty loses.

In quiet South-East Asian markets, Singapore's Straits Times index gained 1.46 to 1663.21, while the Kuala Lumpur Composite drifted 2.71 to 695.82 and Thailand's SET lost 2.06 to 315.46.

The Jakarta Composite edged up 0.55 to 426.96.