Tokyo slides despite warning

JAPANESE stocks slid today after a warning that recent weakness in financial markets could threaten the country's fragile economic recovery. The Nikkei 225 dived 179.49 points to close at 10,632.81 as Bank of Japan Governor Masaru Hayami told Parliament that instability in the stock market, which has fallen by more than 1000 points since the beginning of June, and the rise in the value of the yen put recovery at risk.

'If these developments become excessive and financial markets become unstable, it could have negative effects on our recovering economy,' he said. The Governor stood by the bank's earlier assessment that a rise in exports and higher production were stabilising the economy after months of decline.

While the yen moved back above 120 to the US dollar in early trade, its 10% rise in the past three months continued to scare investors away from exporters. Shares in consumer electronics giant Sony lost almost 3%, despite its latest forecast that it would be in the black in the current year after earlier warning of losses. Analysts believe that prediction was based on a dollar/yen value of 130, which puts a question mark over the company's forecast.

Other electronics stocks in Tokyo were battered by a warning from ratings agency Standard & Poor's that the credit quality of Japanese manufacturers remained negative as poor sales hollowed-out balance sheets. Shares in the country's second largest trading house, Mitsui, fell almost 3% after employees were arrested on suspicion of bid rigging on government contracts.

Signs in Hong Kong that buyers' appetites for stock was returning sent the Hang Seng index up 186.39 points to 10,765.58. Investors were cheered by strong demand for the latest tranche of the Tracker Fund, the unit trust launched by the government to offload shares it snapped up in 1998. Property stocks led the rise for a second day as buyers judged that the present record affordability levels of residential apartments would boost sales. Cheung Kong, flagship property company of tycoon Li Ka-shing, rose after the company tightened its grip on the market through the purchase of two local development companies.

The rebound in Taiwanese and South Korean markets was extended as buyers were tempted back by the prospect of bargains. Taiwan's Weighted Average added 82.98 points to 5130.8, while in Seoul the Kospi advanced 15.38 points to 768.74.

In Singapore the Straits Times index was up 15.61 points at 1598.75 as investors digested a statement from the government-controlled Temasek Holding company that it would cut its stakes in local industries. News Corporation's move yesterday to cut the value of its offer for loss-making Italian pay-TV group Telepiu was well received in Sydney, where the stock clawed back a little of its recent decline with a 2.3% jump. The All Ordinaries index, held back by weak mining and bank stocks, closed 23.7 points up at 3156.6.

Malaysian stocks edged 2.20 higher taking the Kuala Lumpur Composite index to 741.55, while earnings hopes boosted Thailand's SET index, which gained 2.64 points at 397.79. Indonesian stocks maintained recent momentum, and the Jakarta Composite index added 10.19 points to 488.72.

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.