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Asian Markets Update: Index Concerns Cap Nikkei Rise

The looming and overdue rejigging of Japan's benchmark index means managers are having to sell a lot of shares in a hurry.

TOKYO -- In a sign of how potent index investing has become in Japan, stocks on Japan's benchmark

Nikkei 225

index barely inched ahead, as concerns over a reshuffle of the index outweighed any relief over a second major rise on U.S. markets.



performance overnight, the Nikkei index gained only 0.6%, as portfolio managers with index-tracking funds were busy dumping the outgoing 30 shares from the index, as well as selling other stocks to raise cash for buying the new entrants. The index officially changes April 24.

The Nikkei 225 rose 117.10 points to 19,086.62, while the


index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, climbed 23.42, or 1.5%, to 1619.82. The


small-cap index jumped 3.51, or 4.9%, to 75.29, while the Nikkei


index rose 54.10, or 3.3%, to 1689.49.

Even though the Nikkei 225 will be pressured until Friday, traders said investors were feeling more comfortable with market conditions. However, the same traders said they will closely watch how retail investors in the U.S. react to the increased volatility of the past week.

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"If U.S. mutual funds investors get cold feet if the markets keep gyrating like they have been, that will definitely dampen retail activity in Japan," said one trader at a large trading house.

There were some bright signs in the Internet sector today, starting with

Yahoo! Japan

. Shortly before the market close yesterday, the company said its pretax profits for the year ending March 31 grew by 420% to 2.03 billion yen. Shares, which dropped 14% yesterday, climbed 2 million yen, or 6.7%, to 31.95 million. This news in turn helped Yahoo! Japan's parent


trade for the first time in two days. Although Softbank fell 5000, or 9.8%, to 46,300, traders said they were encouraged to see the share actually trade, as a shortage of bids for the Internet incubator meant that trading did not proceed earlier this week.

Today was the first day of trading for cybermall company

Rakuten Ichiba,

which closed 9% below its offering price, at 30 million yen. The stock opened 40% below offering price, but recovered throughout the day, lending some support to the Net sector. Rakuten is one of the few Japanese net firms that boast a profit.

Technology plays bounced higher, with


(SNE) - Get Sony Corp. Report

climbing 210, or 1.7%, to 12,590 and



rising 1550, or nearly 9.9%, to 17150.


Bank of Tokyo Mitsubishi



Mitsubishi Trust & Banking

announced plans to merge under a joint holding company in April 2001. The market cheered as the banking sector continued to consolidate but BOTM closed down 82, or 5.3%, at 1468, while Mitsubishi Trust gained 76, or 8.6%, to 958.

The greenback moved little against the yen in lethargic trading, and fetched around 104.87 yen.

Stocks in Hong Kong mostly rose, with the benchmark

Hang Seng

index up 109.74 points to 15,388.06 shortly before the close. The heaviest trading came in

China Telecom,

(CHL) - Get China Mobile Ltd. Report

up 3.2% at HK$57.00 shortly before the close. British banking group



rose 1.25 or 1.4% to 87.75, after announcing plans to establish a joint online banking and investment business with

Merrill Lynch.


Pacific Century CyberWorks

fell 2.4% to 13.90, after a report in a Rupert Murdoch-controlled newspaper, The Australian, that Murdoch may re-enter the battle to take over Hong Kong's biggest phone company,

Cable & Wireless HKT.


Currently the subject of a Pacific Century takeover offer in exchange for cash and stock, the HKT deal may come apart if PCCW's shares keep falling. HKT shares were unchanged at HK$17.15.

Murdoch's main listed company,


(NWS) - Get News Corporation Class B Report

led Australian shares higher today, as it rose 5.4% to A$19.02. Also involved in the HKT takeover bid is Australian phone company


(TLS) - Get Telos Corporation Report

which has said it will invest $1.5 billion along with Pacific Century and lend PCCW another $1.5 billion if the takeover proceeds. Telstra's stock fell on that news last week, because bond rating agencies hinted they would consider downgrading the Telstra's credit rating if the deal went through. Telstra rose 2.7% today in Australian trading, to A$7.55.



index rose 7.78 points to 755.08, as

Pohang Iron & Steel,

known as Posco

(PKX) - Get POSCO Report

said it would sell another 5% of the company to foreign investors. Posco shares in Seoul fell 1,000 won, or 1%, to 98,000.

In Taiwan, the Weighted Index fell 202.63 or 2.2%, to 9104.40. While Taiwan stocks did fall last Saturday following Friday's meltdown on U.S. markets, Taiwan was the only Asian market to rise on Monday as the rest of the region was plunging.

Taiwan Semiconductor Manufacturing Co.

(TSM) - Get Taiwan Semiconductor Manufacturing Co. Ltd. Report

fell NT$6.00, or 3.2% to 183.00.