The Coming Week in Asia: Intel Worries Could Rain on Tech's Parade

TOKYO -- The Japanese government, often criticized for making decisions very slowly, quickly adopted an ambitious plan last week that it believes will help the country speed past the U.S. in high-speed information technology by 2005.

The plan calls for the government to bolster technology literacy by doling out what it calls IT vouchers worth 6,000 yen ($56.18) each to citizens older than 20. Officials hope these vouchers will push the recipients to buy computers or to take lessons on surfing the Internet. The plan may sound a bit bizarre to foreigners, but in a culture that puts a strong emphasis on consensus, some members of the government deem it necessary.

"In the new Internet age, not being able to use a computer is like not being able to read and write," said Taichi Sakaiya, chief of the Economic Planning Agency.

The government may have picked a less-than-auspicious time to act quickly, though. Given the bomb Intel (INTC Quote) dropped on U.S. markets last week, and the shock waves that reverberated to these shores, people might think danger, not opportunity, when they hear the word tech. The markets certainly will be thinking that way this week as traders try to game what is expected to be a jittery market. The tech fears come on top of weeks of heavy selling by institutional investors ahead of the close of the fiscal first half on Sept. 30.

Most market watchers believe large chip and electronics-parts makers like Hitachi (HIT Quote) and Sharp will have a chance to surge this week now that the institutional selling is finished. Even after Intel's warning, many believe this still will be the case. They also feel it will be more important to watch U.S. markets for direction.

"Tokyo markets will continue to follow the moves of U.S. markets early next week," says Masaaki Higashida, general manager at Nomura Securities. "However, I think everyone is also looking to end the fiscal first half on a good note, even if there are lingering concerns, which also include a weak euro and high oil prices." Higashida reckons the Nikkei 225 index will trade in a narrow range of 16,000 to 17,000 next week, vs. Friday's closing price of 15,818.25.

Local fund managers have stepped into the market almost every time the Nikkei slipped below the key psychological support level of 16,000. They are expected to do the same, starting midweek. And if fund managers move in to buy companies that boast profits, much of the buying will be in the tech sector. Also, investors can dilute some of the tech risk by holding Japanese semiconductor companies that have one foot in mobile phones and the other in an unrelated revenue stream.

An example is Sanyo Electric, which is expected to post first-half net profits of 19 billion yen ($17.6 million) for a whopping 426.5% jump from the same period last year. Operating profit for the year ending March 2001 is expected to reach 90 billion yen ($883 million), an increase of 45% from the previous year. Sanyo likes to attribute increases in sales and profits to its booming chip and mobile phone parts operations. But upon closer inspection, about 60% of the company's profits comes from a completely different business -- the sale of batteries and digital cameras.