Tokyo rocked by second rating shock

A SECOND downgrading of

The Nikkei 225 Average dived 324.08 to close at 10,624.81, taking it to a two-day loss of 4%, while other Asian markets were hit by a wave of profit-taking after disappointing US consumer confidence figures.

Standard & Poor's followed the move earlier by the Fitch agency in cutting its credit rating on Japan from AA-plus to AA. The clouds over Tokyo were further darkened by the collapse of Niigata Engineering, which owes money to many of the country's major banks.

Banking circles had feared a cut to a single-A rating, which would have caused the government serious problems in raising funds. The danger has not passed, as Moody's has yet to issue its assessment.

S&P was strongly critical of the Japanese government's lack of action in tackling its fundamental economic problems. 'The downgrade was prompted by the Koizumi administration's slow progress in enacting its popular mandate of deep structural reform,' said S&P.

The agency said it expected further significant weakening of both the economy and the government's fiscal position before more radical action is taken.

S&P also threatened to downgrade Japan's debt-ridden banks because the poor quality of their underlying assets. It has put the big four banks - Mizuho Holdings, Sumitomo Mitsui Banking Corporation (SMBC), Mitsubishi Tokyo Financial Group and UFJ Holdings - under review, which sent their shares sliding today.

Mizuho Holdings, the world's biggest bank, led the tumble with a fall of 7%, while other big banks fell by as much as 4%. The unexpectedly large drop in US consumer confident published overnight hit Hong Kong trading and exporting stocks, and the recent rally by the Hang Seng index stumbled for the second day running, the market down 115.57 points to 11,145.97 at the morning close.

Falls were led by Li & Fung, a major reexporter and logistics group, and Johnson Electric, the world's second-largest supplier of small motors for electronic devices and other consumer goods.

Property stocks slipped on worries about demand, while HSBC Holdings fell 25 cents to HK$93.25 following reports that it planned to take a stake of 8% in China's Bank of Shanghai.

South Korean stocks suffered from an attack of nerves by foreign investors who feel the recent rally has gone too far, and the Kospi index fell for the second day, losing a hefty 34.76 points at 635.34.

Profit-taking also hit Taiwanese stocks, and the Weighted Average extended yesterday's losses by 132.75 points to 4447.58.

Singapore's biggest bank, DBS, led falls in financials which took the Straits Times index down 18.32 points to 1483.78. The brakes went on Sydney's recent rally, although the fall in the All Ordinaries index was limited to 0.7 points at 3290.7, comfortably above its low of the day. Retail stocks continued to grow, but banks and resource stocks undid those gains.

Stocks in Thailand and Malaysia fell on economic fears, Bangkok's SET index down 3.43 points at 293.03 and the Kuala Lumpur Composite off 4.71 points at 633.34. Indonesia's Jakarta Composite edged up 1.42 points to 382.4.

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.