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Asian Markets Update: Japanese Stocks Rise as New Funds Pick Up Blue-Chips

In Hong Kong, stocks soar in sympathy with Nasdaq and local IPO fever.

TOKYO -- Japanese stocks rose following another record close on


but although Japanese traders still carefully watch the performance of U.S. equity markets, stocks in the world's two biggest economies are tending increasingly to move for different reasons.

Despite the roaring day tech stocks had in the U.S. Wednesday, the key

Nikkei 225

index rose 51.89 to 19571.44 as local fund managers picked up blue-chips -- not tech issues -- for their newly created funds. The


index, comprised of shares listed on the

Tokyo Stock Exchange's

first section, climbed 22.81, or 1.4%, to 1690.05. The


small-cap index was up 2.63, or 2.2%, to 124.87, while the Nikkei


shares climbed 48.36, or 1.8%, to 2677.57.

"A rise in U.S. equities always helps," said one trader from a large Japanese firm. "But we're going our own way right now mostly because fund managers (who run Japanese equity funds) are looking for stocks not connected with the overseas markets right now."

Shares in what is commonly regarded as Old Japan, including utility, shipping and steel companies, mostly rose. Although restructuring has just started for many firms in these sectors, some experts believe the outlook is a bit brighter than last year.

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As Japan's beleaguered banks move to lend more on the basis of creditworthiness and not political ties, companies throughout Old Japan, including the banks, are realizing they have little choice but to restructure, said Kirk Neureiter, director of research at

Fidelity Investments Japan.

"Money used to get passed down to the right places to keep the status quo. Now domestic institutions are realizing they can't provide like they used to. That's why they've cut staff and increased their investment in information technology," he said.

Kawasaki Steel


jumped 10, or 6.2%, to 171.

Tech stocks were mixed.



fell 30 to 29,970, while



climbed 40, or 1.7%, to 2375.



jumped 850, or 4.7%, to 19,000 when

Merrill Lynch

upgraded its rating on the firm to a buy.


rose 9000, or 5.7%, to 166,000 as investors got excited over news that it will likely receive formal approval to buy out state-controlled

Nippon Credit Bank

later today.

Data processor

Trans Cosmos

announced plans to start an Internet joint venture in Hong Kong with


today, helping shares rise 1250, or 2.7%, to 48,500.

The greenback was trading around 110.99 yen.

Hong Kong's

Hang Seng

index soared 681.87, or 4.2%, to 17,058.66 thanks to a hot public offering from a Web portal, a record close on Nasdaq and unconfirmed talk that

Pacific Century Cyberworks

may have clinched a merger deal with

Cable & Wireless HKT



PCCW rose 0.50, or 2.4%, to 21.55 as rumors swirled around the market that the firm and C&W HKT could announce a merger on Monday. C&W HKT, up 1.05, or 4.4%, to 24.85 has been in merger talks with

Singapore Telecommunications


The IPO for

, an Internet portal jointly owned by

Hutchison Whampoa



Cheung Kong

, looks to be 1,300 times oversubscribed. Roads were blocked in Hong Kong Wednesday as tens of thousands jammed banks to pick up application forms for the IPO. Hutchison rose 5.00, or 4.2%, to 125.00, while Cheung Kong climbed 2.50, or 2.45, to 106.50.

After climbing nearly 13% yesterday,



was 0.50, or 1.5% higher, at 33.50 on unconfirmed talk that it was in negotiations with PCCW to develop a broadband multimedia service.

Traders said a spurt of short covering in the futures market ahead of contract expiries on Monday also sparked today's rally.