Tokyo sizzling on chip tie-up

THE publishing of the banns of marriage for the chipmaking interests of Japanese giants Hitachi and Mitsubishi Electrical set bells ringing on the

The profitable prospects of economies of scale and combined marketing and research strength sent Mitsubishi shares rocketing 11% and Hitachi bounding almost 7%. Sympathetic strength in other technology stocks, and strong demand for consumer electronics groups combined to power the Nikkei 225 Average up 294.44 to 11,792.82.

Sentiment in Tokyo and much of the rest of the region was also buoyed by a string of Wall Street predictions that the US economic rebound is well under way. Forecasts by Merrill Lynch and Salomon Smith Barney that the US economy would grow 5% in the current quarter countered any concerns that the US Federal Reserve is set to indicate that the next move for interest rates is up.

The sharp rebound in the Nikkei, which is now up almost 12% on the year, was seen as lifting some pressure from the Bank of Japan, which starts its policy meeting today. Politicians have been urging the Bank to ease monetary policy further to help end Japan's deflation, but so far the key policy committee has stood firm.

Some traders have detected signs that the government has been encouraging the recent gains in the market in an attempt to push the Nikkei 225 above 12,000 by the end of the month. This would stabilise the banking system by narrowing some of the massive losses on the portfolios of the banks ahead of their year-end. Export stocks in Japan joined the technology party, led by Sony Corporation, up almost 3%, and other suppliers of consumer electronics to the US market.

South Korean stocks remained the regional favourite and rose more than 2% at one stage as foreign institutions continued to pour money in on the basis that even at current 23-month highs, valuations are cheap. The Kospi jumped 18.21 to 887.92, taking this year's advance to 27%, with technology stocks leading the way.

In a subdued Hong Kong, stocks surrendered thin gains, with the Hang Seng index slipping 7.8 to 11,222.8. Major telecommunications operator Pacific Century Cyberworks was a top performer for the second day ahead of full-year results on Wednesday, which are expected to show it moved into the black last year, after heavy losses on failed internet ventures.

Nagging doubts about the corporate outlook for Taiwan's blue-chips pushed investors to the sidelines and the Weighted Average fell 65.38 to 5906.73. Singapore's blue-chips continued to power the Straits Times index, which added 16 points to 1802.3. Singapore Airlines extended recent gains on better passenger numbers and banks rose mildly on economic recovery hopes.

Sydney investors seem to need further hard evidence that the US has really turned the corner, and in thin trading the All Ordinaries rose 60.3 to 3460.3. Malaysia's Kuala Lumpur Composite eased 6.30 to 751.14. Thailand's SET drifted down 0.86 to 373.87, while the Jakarta Composite added 2.25 to 471.92.

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