Yen knocks stuffing out of Nikkei

JAPANESE traders looking at their screens today might well have had the feeling they have been here before.

As it turned out, last Friday's session proved a mere dress rehearsal for Monday's brutal action as a more robust yen knocked the stuffing out of the Nikkei 225 Average, especially exporters.

The key to the steep sell-down came from Dubai at the weekend, where finance ministers from the Group of Seven leading industrialised nations called for more flexible exchange rates.

That was seen as staying Tokyo's interventionist tendencies in the foreign exchange markets, allowing the yen to spurt higher. As that happened with a vengeance today, equities were sent sharply lower.

The leading Japanese benchmark fell 463.32 points, or 4.2%, to 10,475.1, echoing but far exceeding the backwards step taken in the final session of last week. The decline was paced by the big-name exporters.

Toyota crashed 210 yen, or 5.7%, to 3490, Nissan was clipped by 68 yen to 1261, a 5.1% slide and Honda tumbled 410 yen, or 8%, to 4750. All three carmakers have made heady gains in recent months on hopes of better sales from overseas, which would be dashed if the yen continued to strengthen.

It was the same gloomy picture for the world's two biggest makers of consumer electronics. Matsushita Electric Industrial, the firm behind the Panasonic brand, was 81 yen down at 1,410, a 5.4% decline, while rival Sony was 200 yen, or 4.7%, softer at 4,100.

Traders on the equities and foreign exchange markets were left wondering just how far and fast the process would run. Some speculated the yen, which touched 111.39 to the dollar - its highest since December 2000 - could climb as high as 110.

They noted the yen-generated selling of stocks came after some market watchers had said equities were set for consolidation after rebounding from 20-year lows seen in April.

Banks, whose business performance is principally determined domestically, proved immune to today's reversal. Mizuho, the world's largest lender by assets, gained 6,000 yen, or 2.4%, to 254,000, Sumitomo Mitsui picked up 2,000 yen, or 0.4%, to 505,000 and UFJ firmed 13,000 to 295,000, up 2.7% .

It was a similarly nasty story in South Korea, where a resurgent won buffeted exporters. As the currency was pulled to near a three-year high against the dollar, the Kospi stock index slipped 33.36 points, or 4.5%, to 714.89.

Chipmaker Samsung Electronics dropped 19,000 won, or 4.4%, to 411,000, carmaker Hyundai fell 1,450 won to 35,300, a 4% slide, and steelmaker Posco eased 6,000 won, or 4.3%, to 133,500. All three rely heavily on their export earnings to generate profits.

In Hong Kong, trade was largely featureless apart from a smart upwards spike in de facto flag-carrier Cathay Pacific.

Brokers said bargain-hunters had moved in after the company was recently rocked by fears that the killer Sars bug could reemerge. Cathay rose 25 cents, or 2%, to HK$12.35. Conglomerate Swire Pacific, which holds a major stake in Cathay, rode higher in its slipstream, better by 60 cents, or 1.4%, to HK$43.40.

The 33-member benchmark Hang Seng index was up just 7.76 points at 10,976.09, a minimal move in percentage terms.