To: DMaA who wrote (11106 ) 12/28/1997 11:44:00 PM From: Scrapps Respond to of 22053
TOKYO (Reuters) - Korean markets rallied on encouraging news from the International Monetary Fund on Friday, but Japanese stocks sank deeply, wiping out gains built over the past two days. Tokyo brokers said the market was haunted by fears that Japanese banks' tight lending stance might trigger more corporate failures, and that the market was likely to stay nervous amid concerns over the financial health of some Japanese firms. The key 225-share Nikkei average lost 497.50 points or 3.25 percent to close at 14,802.60. Trading was very light, with only 380 million shares traded. Worries that relatively small firms, which depend on banks for funds, may fail before the end of 1997 has prompted many stock dealers to close their positions, said Akishige Ishikura, analyst at Dai-Ichi Securities Co. Ltd. "Everyone has the same thing on their mind," he said. The last trading day for the Tokyo stock market in 1997 is Tuesday. The market will only be open for half the day. The Hong Kong and Sydney stock exchanges were closed for the extended Christmas weekend holiday. South Korean markets reacted euphorically on Friday to an agreement to speed up IMF-led aid payments, but traders said the rally would be short-lived because of concerns over the impact the deal could have on the economy. Traders said South Korea's agreement to stiffen reforms in return for faster disbursement of the nearly $60 billion in bailout loans would lead to more hardship for Korean firms. South Korean companies are already experiencing the poorest environment in several decades after a string of corporate failures earlier this year sent a ripple effect through the economy. Stock investors hailed the deal, which was announced at midnight on Wednesday. The composite index closed trading up 6.74 percent or 23.70 points at 375.15, after peaking at 376.84. "Investors are letting their breath go as South Korea is getting early loan payments from the IMF," said Kim Young-bum at Seoul Securities. Brokers said shares of securities firms led the rally on the strength of the overall market's recovery. The sub-index for securities firms was up 7.16 percent or 36.59 to 547.57. But markets were particularly worried about Seoul's pledge to maintain overnight call rates above 30 percent per annum to stabilize the won currency, attract investment and discourage lending to marginal firms. The overnight call rates rose to an average of 31.99 percent on Friday from 30.0 percent on Wednesday. Thursday was a market holiday for Christmas. Higher interest rates would spur dollar sales by companies and individuals, who until now have not been exchanging their dollars because they expected the won to weaken, money market experts said. But further rises in interest rates appeared also aimed at speeding restructuring of the local industries by causing shaky companies to fold rapidly. Fears over a continuing wave of corporate failures are growing also because domestic banks have been tightening credit lines to improve capital adequacy levels. "As banks try to meet BIS [Bank for International Settlements] capital adequacy levels, they will call in loans causing further corporate defaults next week," said Na Young-hwan at Kyobo Securities. In Singapore, shares lost all their morning gains and ended lower on Friday along with Wall Street on a dismal outlook for the New Year, dealers said. "There might be a pick-up in volume next week when people start trickling back to work," said a dealer with a local house. "But we are not expecting big orders for the New Year because we think sentiment is still poor." The Straits Times Industrials Index ended at 1,552.52, down 20.44 points or 1.30 percent, after hitting a high of 1,574.94.