Asian Markets Update: Japanese Tech Shares Give Back Some of Their Great Gains

In Hong Kong, excitement over Legend's chances of joining the chosen, indexed few.
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TOKYO -- Tech shares took a beating in Japan Friday as investors fretted over the possible performance of U.S. equities ahead of today's American employment report. If it shows strong jobs numbers, a further rise in interest rates could happen sooner rather than later.

The yen's comeback against the dollar also had investors shedding export-oriented shares, since a strong local currency hurts profits because products get more expensive for overseas customers.

The key

Nikkei 225

stock index fell 187.57 to 19,927.54, while the

Topix

index, which includes shares listed on the

Tokyo Stock Exchange's

first section dropped 31.99, or 1.9%, to 1686.49. The

Jasdaq

small-cap index tumbled 2.85, or 2.4%, to 117.89, while the Nikkei

over-the-counter

shares slid 86.24, or 3.3%, to 2516.81.

Although most investors believe the

U.S. Federal Reserve

will hike rates in the months to come, some investors feared that the employment report could add fuel to the fire, and that the Fed could hike rates by 50 basis points at its next meeting.

"There is the possibility that U.S. investors could pare back on risky investments as the Fed continues to raise interest rates," said Akio Sakanaka, head of

Sovereign Asset Management

, a financial consultancy. "That could include Japanese stocks as well but what will offset that is the power of domestic retail investors."

Tech shares were bleeding by the time trading stopped for the day.

Sony

(SNE) - Get Report

, ahead of its Saturday release of its new PlayStation 2 game console, slipped 1300 yen, or 4.0%, to 31,000 and

Hitachi

(HIT)

dropped 34, or 2.4%, to 1385, while

Canon

(CANNY)

slid 190, or 4.3%, to 4210.

Despite revising its net profits for fiscal 1999 to 18 billion yen versus 17 billion yen, shares of

Konami

slid 800, or 4.1%, to 18,600.

Among risers,

Matsushita Communication Industrial

rose 600, or 3.3%, to 18,600 when the firm increased its dividend payment for the second half of FY99, to 18 yen vs. 7 yen. It also said it would cut the size of its board lot to 100 shares from the current 1,000 starting Aug. 1.

The strength of the yen against the greenback had some investors worried that it would crimp the profits of exporters. The dollar stood around 107.66 yen in lethargic trading today but has fallen from the 110-yen level since Tuesday.

Toyota Motor

(TM) - Get Report

fell 20 to 4350.

Hong Kong's

Hang Seng

index climbed 348.43, or 2.1%, to 17,285.24. But the big gainer today was off index: Computer maker

Legend

(LGHLY)

, rose HK$7.80, or 17.3%, to 53.00 on speculation that the firm could be included in

Morgan Stanley Capital International's

China Free index and eventually in the Hang Seng. Many fund managers holding foreign securities like to look at the MSCI indices to gauge the performance of their investments, and some are restricted to buying stocks included in a major index.

Arbitragers were reportedly busy at work over the likely merger of

Pacific Century Cyberworks

and

Cable & Wireless HKT

(HKT)

. The former rose 0.65, or 3.1%, to 21.35, while the latter climbed 0.60, or 2.7%, to 22.85.

Index heavyweight

China Telecom

(CHL) - Get Report

rose 3.00 or 4.1% to 76.00 while

Tom.com

, the new infotainment Web portal that just went public, jumped 0.45, or 5.8%, to 8.20.

After jumping by 8.0% Thursday, Korea's

Kospi

index inched up 0.17 to 894.83.