MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY JUNE 29, 1998 (3)
MARKET OVERVIEW, Con't
INTERNATIONAL
Pacific Rim Gets Survey Boost
Japan's 'Tankan' Survey Boosts Tokyo, Sydney; HK Sheds 1.7 Percent
TOKYO - The widely watched "tankan" survey released by the Bank of Japan helped bolster stocks in Tokyo and neighboring Asia markets Monday, but futures concerns sent Hong Kong down.
The tankan survey showed that Japan's business confidence had not deteriorated as much as expected, brokers said.
The key Nikkei 225 average rose 155.69 points, or 1.02 percent, to end at 15,365.73.
"The index did not turn out to be extremely bad, and the stock market had mostly discounted negative figures," said Shinichi Ichikawa, strategist at Credit Lyonnais Securities.
"The market was paying closer attention to how banks' bad loan problems will be settled," he said.
The diffusion index for major manufacturers -- the most widely watched component of the Bank of Japan's tankan -- fell to minus 38 in June from minus 31 in the previous survey in March. But that was not as bad as the minus 42 average for June in a Reuters survey of economists' forecasts.
The "tankan" survey lifted the yen against the dollar, which also helped brighten sentiment in the stock market. The dollar briefly rallied to 143.40 yen on Monday, but it quickly eased to as low as 141.38 yen after the survey was released.
The yen has been on a declining trend again in recent sessions amid worries over Japan's flagging economy, and skepticism that the government will take swift action to solve the bad loan problems.
Share prices in many banks recovered on Monday after Friday's announcement by Long Term Credit Bank of Japan and Sumitomo Trust & Banking that they were discussing a merger.
The news prompted some optimism that the merger would be a first step in fixing Japan's banking system, which is creaking under the weight of as much as 77 trillion yen in problem loans.
LTCB jumped 24 yen to end at 97 in the heaviest trading volume in the first section of the Tokyo Stock Exchange (TSE). Commerz Securities (Japan) senior manager Hitoshi Ichio said: "The rise in bank shares today was mostly attributed to buying backs, which will not continue for a long time."
Futures contracts drag down Hang Seng - Hong Kong stocks gyrated from positive to negative throughout Monday trade to close sharply down on trade related to the expiration of June futures contracts.
Brokers said more weakness was likely on Tuesday.
The Hang Seng Index closed down 147.15 points, or 1.71 percent, at 8,460.71, after leaping ahead to 8,790.55 after the open, then sliding to a low of 8,444.25 just ahead of the close.
"Because of the rollover, there is a premium to the futures," Gary Wong, associate director at Vickers Ballas said. "But once June expires, the index will fall another couple hundred points."
The June Hang Seng Index futures contract, which expired at the close of trade on Monday, gained 66 points to end at 8,646, a large premium to the spot market.
Strong demand to buy back or close out the June contract pushed it well above the spot market close, brokers said.
But the July contract sank 220 points to close at 8,390 on heavy trade of 26,613 contracts.
"People are still very bearish on the market," Kathleen Emerson in institutional sales at ING Futures and Options said.
"What you are probably seeing is people liquidating their short positions in June and selling the July," Emerson said.
Singapore shares end flat - Singapore shares ended little moved with only thin activity as the market waited for the government to announce moves to cushion knocks to the domestic economy from Asia's crisis.
The 30-share Straits Times Industrials Index was off 0.44 points at 1,085.15 at the close after nudging a high of 1,097.92 in the morning.
"People want to see exactly what the measures are. They think the market can't run ahead too much. They want to hear the good news before they buy more," an institutional dealer said.
"Those who bought last Friday thinking the market would move up, saw that it wasn't and took profit quickly," another dealer said.
The government said earlier on Monday there would be no cuts for the time being to employers' or employees' contributions to the compulsory Central Provident Fund pension scheme.
But it said it would make adjustments to property tax payable by companies.
"I think the market is probably expecting more than what the government intends to give. So there is not likely to be a major boost," a dealer said.
Sydney aided by Tokyo - The Australian share market ended Monday 0.4 percent higher, helped by Tokyo gains and steadier regional currencies, while end-of-financial year concerns continued to drive individual stocks.
The All Ordinaries index closed up 11.2 points up at 2,621.1 after peaking at 2,631.4. Turnover was A$1.01 billion (US$606 million).
Gains were centered on leading industrials, with media group News Corp. hitting a new high of A$12.32 before closing 22 cents up on the day at A$12.10 after its U.S. ADRs rose.
"There could be a bit of window-dressing for the end of financial year," dealer Steve Mayne of Nevitts said.
The Bank of Japan's "tankan" survey, which showed less negative business sentiment than some had feared, allowed Australian investors to focus on adjusting their portfolios before books close on Tuesday.
Many strategists point to an expected rebound in oversold resources stocks as a key driver in a widely expected overall market recovery, seen taking the All Ordinaries index beyond its April record high of 2,893.7 by the end of 1998.
Philippine stocks closed sharply higher, boosted by end-of-the-quarter portfolio revaluations on the eve of the inauguration of President Joseph Estrada.
The 30-share Philippine Stock Exchange Index rose 36.76 points, or 2.1 percent, to 1,760.13 after gaining 14.34 points Friday. Shares on the Manila market opened weak but picked up at midsession, with the index closing just off its high as fund managers window dressed their portfolios, traders said.
The key index in Bangkok surged 2.3 percent as bargain hunters picked up stocks with large market capitalization. The Stock Exchange of Thailand index rose 6.22 points to 271.20.
Malaysian shares closed generally mixed as the fall in the Malaysian currency limited buying by local fund managers to boost the prices of stocks they are holding, dealers said. The Kuala Lumpur Stock Exchange's Composite Index, which tracks the prices of 100 key stocks, rose 1.1 percent, or 5.10 points, to 450.77. Meanwhile, the Malaysian ringgit was quoted at 4.1800 to the dollar, compared with late Friday's 4.0320.
Elsewhere:
Taipei: Share prices closed lower because of a strong sell-off in technology stocks. The market's key Weighted Stock Price Index fell 146.23 points, or 1.9 percent, to 7,535.73.
Seoul: Share prices closed lower on worries of labor trouble after the government shut down five financially weak banks. The Korea Composite Stock Price Index fell 3.30 points, or 1.1 percent, to 298.60.
Singapore: Share prices closed little changed. The benchmark Straits Times Industrial Index slipped 0.44 point to 1,085.15.
Wellington: New Zealand share prices closed lower in lackluster trading. The NZSE-40 Capital Index fell 16.40 points, or 0.8 percent, to 1,956.84.
Jakarta: Share prices closed mixed in thin trading. The Composite Index edged up 0.361 point to 431.231.
Strong Day For European Stocks
Frankfurt And Paris Set Records As London Flattens After Much Gyration
LONDON - The major European bourses were generally buoyant Monday on better than expected economic news from Japan, gains in major Asian markets and a rallying Dow late in the day.
But a sharp fall in Russian shares as well as a further plunge in the South African rand and stocks served to remind dealers that dangers still lurk in emerging markets.
The bourses in Frankfurt and Paris enjoyed record-setting sessions while London's FTSE, however, posted a gain of only a few points, having wavered in negative and positive territory for much of the day.
The leading share FTSE index closed up 7.1 points, or 0.12 percent, to 5,895.0, after sprinting to 5,923.9 earlier in the session. Volume was subdued at 787.2 million shares as investors adjusted portfolios ahead of the end of the second quarter.
"Today has really been a non-event," said one trader. "It's coming up to the end of the quarter, so some institutions are not dealing," he added.
The U.K. market failed to take inspiration from a Wall Street's rally as nerves over Asia's financial and economic crisis and U.S. corporate earnings appeared to ease for the time being.
The main stock feature of the day was renewed talk of a merger between defense giants GEC and British Aerospace, which helped drive the UK equity market higher in early trade.
On the way to 6,000 in Frankfurt - The German Xetra DAX index continued to trade robustly Monday, breaching key resistance at 5,900 in its approach to the 6,000-point threshold.
The Xetra DAX index of 30 blue-chip German companies closed up 63.24, or 1.08 percent, to a record high of 5,933.73, while earlier during the floor-trading session the DAX index closed up 44.71, or 0.76 percent, at 5,915.13.
Trading in the afternoon was thin as many German traders left work early to watch the World Cup football match between Germany and Mexico.
A stronger dollar and gains on Asian bourses buoyed the German stock market. The dollar was last trading around 1.8140 marks, and dealers said that if it maintained a level between 1.75 and 1.85 marks, German shares would be safe.
A firmer dollar boosts German shares because it makes their companies' exports less expensive.
Wall Street's bullish performance also underpinned the German advance.
Dealers were cautious, however, reflecting considerable market vertigo at such dizzying heights, and warned against excessive enthusiasm too early in the week.
"The goal is 6,000 because it looks so obvious that we're going there. But to be honest, I'm not a big fan of this," one dealer said.
"We're more limited on the upside potential than the downside. But who knows," one trader said.
Another dealer warned that if the index reached 6,000 points so early in the week, it may fail to hold its gains as there likely would be anxious efforts to lock in profits.
Vive la bourse - The Paris bourse closed at a record as investors took heart from better than expected Japanese economic indicators.
The blue chip CAC-40 index closed up 32.54 points, or 0.77 percent, to 4248.24, beating a previous record of 4226.11 set June 8.
But volume was thinner than recently. Some analysts suggested the burst of demand at the end of the first half of the year could soon be overtaken by renewed Asia worries. That could pave the way for a correction next month.
"Europe started off generally with a good feeling about Asia, because the Japanese tankan survey was not as bad as people had expected," a London-based analyst said.
"I'm not so confident that Asia is OK. I don't think the CAC will rally on up much longer from here; I think we will probably have another dip next month. Longer term, we like [the French market], but we are not out of the woods yet," he said.
THIS MORNING'S ACTIVITY
Pacific Rim Takes Off
Tokyo Soars On News Of 'Bridge Bank'; News Corp. Bumps Sydney Higher
June 30, 1998: 6:10 a.m. ET
TOKYO - Major Pacific Rim markets, with the exception of Singapore, enjoyed a day of soaring investor confidence based in large part on a firmer yen and further developments in Japan's "bridge bank" plan.
Australia enjoyed a boost thanks in great measure to a jump in Rupert Murdoch's News Corp. shares. Hong Kong stocks moved up on the strength of Tokyo and a recovering yen.
In Tokyo, stocks soared more than 3 percent - News that Prime Minister Ryutaro Hashimoto had ordered the government and his party to consider a U.S.-style "bridge bank" to clean up Japan's bad-loan mess inspired investor confidence, brokers said.
As a result, the key 225 Nikkei average surged 464.54 points, or 3.02 percent, to close at 15,830.27. Nikkei September futures ended 260 points higher at 15,650.
Hopes that the Japanese government will finally try to solve its own problems, particularly its estimated 77 trillion yen in bad loans, were also boosted by speculation that a permanent income tax cut may be in the offing, they said.
"Stocks have been sold recently due to the slowness of Japan's policy making, but people on the sell side are starting to hold back," said Masaaki Higashida, deputy general manager at Nomura Securities Co. Ltd.
Gains were led by bank shares and the Nikkei futures.
"Japan is now addressing the biggest single impediment to economic recovery -- the bad debts," said Coen Kluyver, manager of foreign institutional sales at ING Baring Securities.
Hashimoto's LDP will produce a draft bridge bank plan on Thursday.
Shares in many banks gained amid hopes for a healthier financial system. But Long-Term Credit Bank of Japan slipped 16 yen to 81. Traders said this was because the future of the bank, which is in merger talks with Sumitomo Trust & Banking, remained unclear. Sumitomo Trust was up 10 at 620.
Hang Seng moves up, but closes off highs - Hong Kong stocks, boosted by the strength of Tokyo shares and a recovery of the yen, closed higher on Tuesday, but gains were pared as traders locked in profits ahead of a public holiday Wednesday, brokers said.
The Hang Seng Index ended up 82.39 points, or 0.97 percent, at 8,543.10 after retreating from a day high of 8,660.13.
The steadier yen triggered light window- dressing by institutional investors ahead of the half year end, said Sunny Chan, senior research manager at Seapower Securities.
"Buying continued in the afternoon to support stock prices, creating a better market atmosphere to welcome political leaders who visit Hong Kong," he said.
Sentiment improved on anticipation that Japan was pushing ahead with plans to clear out bad loans in its financial system, but investors were sidelined for further announcements expected from Japan next week, brokers said.
The yen was quoted at 139.83 to the U.S. dollar in late afternoon after recovering from below 142 in early trade.
Chinese President Jiang Zemin arrived in Hong Kong on Tuesday to attend celebrations to mark the first anniversary of this territory's return to China after more than 150 years of British rule. U.S. President Bill Clinton will arrive in Hong Kong for the last stop of his nine-day China visit on Thursday.
The market will close on Wednesday and reopen on Thursday.
News Corp. gains boost Australia - The Australian share market ended 1.8 percent higher on Tuesday, the end of the financial year, boosted by rallies in blue chips News Corp. and BHP. Gains in Tokyo and Wall Street also helped.
"People are getting some negative arbitrage off their books for June 30, and there's some selling of smaller companies exiting the All Ordinaries index," one broker said, adding that media group News Corp.'s jump accounted for much of the overall market's gains.
The All Ordinaries index closed up 47.3 points up to 2,668.4 on turnover of A$1.15 billion (US$702 million).
The market has fallen 2.1 percent over the turbulent 1997/98 financial year, but many equity strategists expect the All Ordinaries index to have beaten its April record of 2,893.7 by the end of 1998.
A firmer Japanese yen and a smaller-than-expected trade deficit of A$536 million in May pushed the local dollar well above US$0.61 on Tuesday and gave the stock market extra fuel.
The focus of the day, however, was Rupert Murdoch's News Corp. after news of a U.S. asset restructure. The stock soared to a record A$13.65 before closing up A$1.08 to A$13.18 after the U.S. ADRs jumped 12 percent overnight.
Rival media stock Publishing and Broadcasting climbed 15 cents to A$6.95.
Mining stocks were mainly lower on the back of weaker commodities, but BHP took back most of Monday's result-related losses by rising 46 cents to A$13.65.
Singapore market unimpressed - Singapore markets were unimpressed by the government's S$2 billion economic stimulus package announced Monday.
The 30-share Straits Times Industrials index shed 18.49, or 1.40 percent, to close at 1066.66.
The package, aimed at combating an expected drastic slowdown in growth this year, includes S$670 million on infrastructure projects and an additional tax rebate of 40 percent on commercial land.
Traders reported disappointment that a hoped-for easing in contribution requirements to the massive central provident fund was not announced.
European Stocks Cool Off
Profits bought following Monday's surge; Japan Plan Boosts Yen Further
June 30, 1998: 7:15 a.m. ET
LONDON - With currency markets at the focus of attention, most European stock markets took a breather after their surge on Monday.
Traders said markets were keenly awaiting Thursday's unveiling by Japanese authority of their plan for a "bridge bank", which would grant new loans to corporate customers of failed banks.
Growing optimism about the Japanese plan helped to lift the yen on Tuesday, providing a glimmer of hope for Western policy-makers worried about the yen's recent plunge.
By late morning, the dollar was trading at around139.93 yen, down from 141.80 on Monday and levels over 142 last week.
Attention in European financial markets was also focused on a two-day policy making meeting at the U.S. Federal Reserve due to start later in the day.
The general consensus was that uncertainty about the Asian outlook would lead the U.S. central bank to leave interest rates on hold, despite policy makers' fears that the U.S. economy's strong growth could rekindle inflation.
London keeps a low profile - The London stock market was around 0.4 percent lower, followings its flat performance on Monday when it refused to participate in what was seen as a general global market surge.
"Business has slowed a lot," said one dealer. "The domestic scene is worrying us but trade is very thin."
By late morning, the FTSE was down 25.5 points, or 0.43 percent, at 5859.
Frankfurt, Paris cool off from Monday - After a record-setting sessions Monday, the bourses in Germany and France were generally lower by late morning as traders sought to lock in profits.
The electronic Xetra DAX was down 52.50 points, or 0.88 percent, at 5,881.23 points. By late morning, the DAX fell 39.56 points, or 0.67 percent, to 5874.57.
Shares were trading flat in the Paris bourse by morning' end. The CAC-40 index was down 5.88 points, or 0.14 percent, to 4242.36.
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