ADR Report:Asian Markets Expected To Drop On Nortel Woes
Updated: Wednesday, March 28, 2001 05:07 PM ET
By Shaheen Pasha
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Asia may have seen some relief Wednesday following the U.S.'s positive consumer confidence numbers a day earlier, but traders said the reprieve will be short-lived.
Nortel Networks Corp.'s (NT, news, msgs) latest profit warning and plan to cut workers has already sent European markets tumbling down, and Asia is expected to follow in suit.
The Bank of New York ADR Index closed at 110.88, down 3.4%, while the International Market Index finished down 3.8% at 622.12 and the Nasdaq ADR Index dropped 5.7% at 349.44.
"Asia should see a downturn tonight," said Mido Shammaa, assistant portfolio manager of the Global e-Fund at International Assets Advisory Corp. "We had some rallying in the Nikkei and Hang Seng, but that should reverse as the markets give back some of their gains following Nortel (announcement)."
Shammaa said as the Nasdaq hovers down at its lows and the Dow rally has lost its fuel, American depositary receipts continue to feel pressure.
The Dow plunged 162.19, or 1.6% at 9785.35 and the Nasdaq fell 118.34, or 6% at 1853.92.
The Nikkei ended up 127.18 points to 13765.51, extending gains toward the close on futures-led buying and short-covering as the index remained well off morning lows.
Honda Motor Co. (HMC, news, msgs) fell 2.1% to Y5,130 in Tokyo on concerns over its loss-making European operations.
Honda on Tuesday cut its outlook for parent net profit for the fiscal year ending March 31 to Y11 billion from Y88 billion on a fall in value of shares in its European unit. In New York, Honda was trading down $3.13, or 3.7%, at $81.35.
The blue-chip Hang Seng Index ended up 143.51 points or 1.13%, at 12851.41.
All eyes were on the embattled Pacific Century Cyberworks Ltd (PCW, news, msgs), which ended at HK$3.475, or about 0.71% lower in Hong Kong. The company recorded a net loss of $886 million in the 12 months ended Dec. 31, compared with a net profit of $44 million in 1999. In New York, the company' shares fell 19 cents, or 4.3%, at $4.18.
But as traders get ready for a bad opening in Asia, European ADRs have already felt the brunt of Nortel's woes.
"Nortel really smacked the market on the head and the ADR market is really depressed here," said Barry Hurwitz, ADR trader at HSBC Holdings PLC. "Most of the stocks are going at about a 3% discount to their local closings."
Hurwitz said he did not expect the European markets, which underwent a massive sell-off on the back of Nortel and Palm Inc.'s earnings warnings, to bounce back for the rest of the week.
"I expect lower openings tomorrow and this will take a few days to play out," he said.
The FTSE 100 closed down 114.1 points, or 2.0%, at 5614.0 on provisional market volume of 1,920 million shares.
Technology and telecom receipts were the big losers Wednesday.
Colt Telecom Group PLC (COLT, news, msgs) fell 86 pence, or 9.5%, to 824 pence in London while its ADR plunged $6.44, or 12.2%, to $46.44 in New York. ARM Holdings PLC (ARMHY, news, msgs) slipped 32.25 pence, or 9.3%, to 315.75 pence in London while dropping $1.80, or 11.9%, to $13.27 in New York. Marconi PLC (MONI, news, msgs) closed down 37 pence, or 9.0%, at 373 pence on its local exchange and fell $1.56, or 12.7%, to $10.75 on the Nasdaq.
The CAC-40 index of the most heavily traded stocks closed down 85.17 points, or 1.6%, at 5150.43 points. Frankfurt's Xetra Dax dived 120.69 points, or 2%, at 5817.52.
Even a little positive news did little to boost the market.
Anglo-Dutch oil giant Royal Dutch/Shell Group (RD, news, msgs SC) said it its Deutsche Shell GmbH unit has agreed to merge its downstream business in Germany into a joint venture with RWE-DEA AG, a wholly-owned unit of RWE AG, which is expected to produce synergies of at least $15 million a year for Shell and RWE. It will make Shell one of the biggest gas owners in Germany.
"It seems like all the positive sentiment has been taken right out of the market," said Joe Dorilio, head of international trading at ING Barings. "There's nothing but red across the board."
-By Shaheen Pasha, Dow Jones Newswires; 201-938-2312; shaheen.pasha@dowjones.com
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