Japanese Rebound Inspires Asian Markets
Thursday March 15 4:01 AM ET
By John Mair
<<SINGAPORE (Reuters) - A stunning Tokyo turnaround of more than six percent from session lows shook some of the gloom off Asian share markets on Thursday, helping lift several into positive territory.
The benchmark Nikkei average ended on its highs, up 309.24 points or 2.61 percent at 12,152.83, after investors reacted positively to Sanwa Bank announcing a doubling of bad debt provisions and some tough talk from the government on the economy.
The Sanwa statement and a blunt assessment by Prime Minister Yoshiro Mori (news - web sites), who said the economy had stalled and it was ``vital not to be negligent in our policy response,'' were taken as signs Japan was finally facing up to the need for reform.
The Nikkei had earlier slumped 3.46 percent to 11,433.88 -- its lowest since December 1984 -- driven by big losses in banking stocks after international ratings agency Fitch placed 19 Japanese banks under negative review.
The unexpected shift upward from there inspired buying in markets such as Hong Kong, Sydney, Singapore and Korea. They had all opened sharply lower in the wake of a day of heavy losses on Wall Street, which was partly due to the Fitch announcement.
The Sanwa statement, released during Japan's lunchtime break, helped reverse sentiment.
Sanwa said loan loss charges -- used to cover bad debts -- by it and two other banks were likely to reach one trillion yen ($8.27 billion) for the financial year ending March 31, above an original estimate of 580 billion yen.
That and Mori's comments were seen as welcome realism. ``The Sanwa comments snapped investors out of their selling mood -- at least for now,'' said Toshihiko Matsuno, deputy general manager of investment advisory office at Sakura Friend Securities.
Stocks Help Yen
The stocks rally in turn helped the yen off 20-month lows against the dollar, as the Japanese unit strengthened to around 120.60 to the dollar from Wednesday's 121.25.
``Having seen Fitch's downgrading depressing the yen overnight, the Nikkei's recovery seems to have helped induce yen-buying to unwind short positions made last night,'' said Takashi Toyahara, foreign exchange manager at Nomura Trust and Banking.
``But the yen's rise is likely to be limited with plenty of buyers waiting to bid dollars below 120 yen,'' Toyahara said. ``The market is still pessimistic about the yen's outlook.''
There is also pessimism on the U.S. economic outlook, and that along with concern over Japan banks -- and the global repercussions if they were in serious trouble -- drove equities losses in the United States on Wednesday.
The Dow Jones industrial average fell to 9,973.46, its lowest close since October 18.
The Nasdaq Composite Index fell 2.12 percent to 1,972.09, and the benchmark Standard & Poor's 500 index fell to a low unseen since mid-December 1998, down 2.58 percent to 1,166.71.
U.S. investors sought refuge in government bonds, driving up prices of U.S. Treasuries and cutting yields to two-year lows.
Striking Turnaround
With that background, markets around Asia opened sharply down on Thursday and traders were searching for lows when Japanese sentiment began to shift and the better mood fed through to other centers.
Hong Kong stocks fell more than two percent at the open, but by 0730 GMT the Hang Seng index index was up 1.36 percent at 13,511.86.
Banking on a cut on U.S. interest rates later this month given slowing growth, investors chased property plays higher.
``The carnage in the U.S. raised the likelihood that we may see a cut in interest rates when the U.S. Federal Reserve (news - web sites) meets on March 20 and investors are thinking that property plays are good bets,'' said Eddie Chan, head of trading at Century City Securities.
Australian stocks clawed back much of their early 1.8 percent loss as major blue chips scraped off their intraday lows, but still ended the session in negative territory. The market closed an hour before Tokyo, and most of Tokyo's gains came in that time.
``It's bounded back with gusto, it's blue chips which are leading it back up,'' said Tony Gordon, senior dealer at Andrew West & Co.
The benchmark S&P/ASX 200 plunged 1.8 percent to 3204.1 in early trade, its lowest point for 2001, but managed to recoup more than one percent to end down 21 points at 3,242.9.
The Australian dollar fell to a record low of $0.4923 on Thursday morning, in part driven down by Japanese selling.
``We are just in one of those periods where the mindset says to sell,'' said Michael Blythe, chief research economist at Commonwealth Bank of Australia, of the Aussie's slide lower.
Singapore shares hit a fresh two-year low at the open with banking and technology bearing the brunt, but again lifted off their lows.
The benchmark Straits Times Index hit a low around 1,768.89 in early trade, levels not seen since April 1999, but recovered most of that ground and was 0.33 percent down at 1,786.24 at 0730 GMT.
Taiwan finished stronger -- it had been in positive territory even before Japan turned around -- by 1.49 percent at 5,742.74, helped by fund managers increasing holdings ahead of the end of quarter.
``At a time when U.S. stock markets fall, foreign investors are shifting their money into Taiwan for bargains,'' said Oliver Fang, institutional sales chief at National Securities.
South Korea was another to shake off early falls. The KOSPI dropped more than three percent at the open but eventually closing down just 0.27 percent at 541.83.>> |
