Asian Markets Update: Stocks Fall, and in Korea Some Plunge

HONG KONG -- Stocks fell in Asia under the influence of continuing bearishness on Wall Street, but in Korea the fall was steeper and more ominous: The leading index plunged by more than 6%, on worries over the solvency of two members of the giant Hyundai conglomerate, or chaebol.

Japan's key Nikkei 225 index fell 239.68 points, or 1.5%, to 16,008.14, while the Topix index, which includes all shares listed on the Tokyo Stock Exchange's first section, fell 5.18 to 1518.78. The Jasdaq small-cap index gained 0.98 or 1.2%, to 81.53, while the Nikkei over-the-counter index shed 9.17, or 0.5%, to 1701.95.

Sony (SNE) was down 400 yen, or 4%, to 9,680. Internet investor Softbank, which was due to report its earnings later Friday, was up 2000 or 12.4% to 18,100. Nippon Telegraph & Telephone (NTT) rose 20,000 or 1.6% to 1.29 million, and Kyocera (KYO) was down 70 or 0.4% to 16,120.

As stocks fell, so did the shares of the companies that underwrite and trade them, partly because of Merrill Lynch's downgrade of Goldman Sachs (GS) on Thursday, which caused Goldman shares to drop 8.8%. Daiwa Securities (DSECY) fell 57 or 4.5% at 1213, and Nomura Securities (NRSCR) fell 120, or 5.2% to 2,200.

Sentiment may also have been hurt by the admission of a Japanese government official that unfavorable data had been purposely excluded in calculating a recent estimate of Japan's Gross Domestic Product. After yesterday's official denial of a New York Times report that this had been the case, the top official at the Economic Planning Agency said Friday that the agency decided not to use revised investment data in compiling a revised 4th quarter GDP figure this month, and instead had used more encouraging preliminary data. The official, Taichi Sakaiya, said that political motives had played no part in the decision over which set of data to use.

South Korea's Kospi index plunged 42.87 points or 6.1%, to 656.66, on worries about a possible financial crunch at the Hyundai group. Hyundai Engineering and Construction plunged 565 won, or 15% to 3205, and Hyundai Merchant Marine fell 740 or 15% to 4205. The steep drops came after the Yonhap News Agency quoted the head of one of Hyundai's major creditor banks, the Korean Exchange Bank, as saying the two Hyundai firms are having "short-term liquidity problems." Part of the bullishness over Korea this year has been based on the assumption that the big industrial groups in Korea are restructuring by selling off or closing non-productive assets, because they can no longer count on politically-motivated credit from banks.

Samsung Electronics fell 20,000 won, or 6.7%, to 280,000. SK Telecom (SKM) fell 10,000 or 2.8% to 345,000, while Pohang Iron & Steel (PKX) fell 2700 or 3.1% to 84,500.

In Hong Kong, stocks fell on the weakness in the U.S. market, with investors in the territory particularly sensitive to the likelihood of higher U.S. interest rates. Since Hong Kong's currency is linked to the U.S. dollar, rate changes in the U.S. are usually mirrored in Hong Kong immediately. The benchmark Hang Seng index fell 198.36 points, or 1.4% to 13,722.70.

Hutchison Whampoa (HUWHY) fell HK$4.00, or 4.7%, to 82.00, while its parent Cheung Kong (CHEUY) fell 2, or 2.8%, to 70.50. China Telecom (CHL) fell 0.20, or 0.4%, to 48.80.

Internet investor and content company Pacific Century CyberWorks was down 0.15, or 1.1%, to 13.40, a day after announcing details of its offer to take over Cable & Wireless HKT (HKT), which fell 0.50, or 2.9%, to 16.80. In the announcement, PCCW said that upon completion of the merger, it would have debts of $31 billion, but that these would be reduced to $5-6 billion. The merged company would count on several subsequent asset sales to help reduce debt, according to PCCW's vice-chairman, Francis Yuen.

Adding to any doubts about the viability of the new business was a statement by HKT's independent financial adviser, ING Barings,, which said "there can be no assurance ... that the combined group's operating cash flow will improve sufficiently or that the combined group will be able to satisfy the required conditions to enable it to obtain funds under its existing facilities." PCCW has yet to conduct any actual Internet business, having garnered most of its publicity until now based on its flurry of acquisitions, many of which have been paid for with stock.

Taiwan's TWSE index rose 121.36 points, or 1.4% to 8559.46.

In currency trading, the dollar at first gained on the yen after Japan confirmed that its GDP data might have been more optimistic than it should have been. But then the dollar gave up those gains, and was recently trading around the same levels as Thursday, fetching 107.335 yen.

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