Asian Markets Update: Japanese Telecom Shares Rise on Hopes of Connection Deal

TOKYO -- Telecom stocks in Japan rose in light trading Monday, on hopes of a settlement between the Washington and Tokyo over interconnection rates.

Local reports said that a deal could be struck within two weeks that could see the lowering of

Nippon Telegraph & Telephone's

(NTT)

high interconnection rates. These sent the monopoly's shares up by nearly 6.0%, fueling the market with expectations that more competition was in store for the telecom sector.

The

Nikkei 225

index gained 203.61 points, or 1.2%, to 17,614.66, while the

Topix

index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, rose 11.91 to 1603.51. The

Jasdaq

small-cap index shed 0.30 to 90.05, while the Nikkei

over-the-counter

index rose 9.71 to 1796.81.

Local reports about the possibility of NTT agreeing to cut interconnection rates, which it charges other telecom firms doing business in Japan, to 28% by the end of 2002, had the market all charged up. The deal is expected to be signed in one-to-two weeks. NTT jumped 80,000 yen, or 5.7%, to 1.49 million ($14,016), while its mobile phone unit

NTT DoCoMo

gained 60,000, or 2.1%, to 2.93 million.

Although a reduction of interconnection rates might eat into NTT's earnings at first, Monday's announcement by the company of increased earnings estimates for two of its units comforted investors. The market was also hoping that in addition to higher traffic thanks to lower costs, competition would guide management at NTT to adopt shareholder-friendly measures in the years to come.

Sony

(SNE) - Get Report

rose 440, or 4.4%, to 10,340,

Matsushita Electric Industrial

(MC) - Get Report

gained 65, or 2.4%, to 2815, and

Toshiba

jumped 35, or 2.9%, to 1232. The three firms said they would jointly set up a satellite TV venture to enter the quickening cable race.

As the U.S. markets take a break Tuesday for the July 4th national holiday, investors in Japan will be awaiting the

Bank of Japan's tankan

survey of corporate sentiment. The survey, which is often regarded as a better indicator of Japan's economic fortunes than some major macro statistics, is expected to show that companies think the economy is improving, and therefore indicate that they will boost spending.

Although the market expects a good reading on the tankan, currency dealers were hesitant to take any major positions ahead of the actual release and before the U.S. market holiday. The greenback edged slightly higher to fetch 106.30 yen.

Hong Kong's

Hang Seng

index dropped 30.81 points to 16,124.97, with profit taking hitting index heavyweight

China Mobile

(CHL) - Get Report

, formerly known as China Telecom. Shares closed down HK$1.25, or 1.8%, to 67.50 ($8.66).

Property shares fared well.

Cheung Kong

rose 1.25, or 1.5%, to 87.50, while

Sun Hung Kai Properties

(SUHJY)

gained 0.50 to 56.50. Investor enthusiasm may have stemmed from the government's statement late Friday that it had abandoned its target of building 85,000 new apartments per year, given slack demand at current prices and high real interest rates.

Shares of

Cable & Wireless HKT

returned to active trading after shareholders approved the firm's takeover by

Pacific Century CyberWorks

. PCCW fell 0.10 to 15.30 while HKT fell 0.20 or 1.2% to 16.95. Now only a court's approval is needed to complete the deal.

Elsewhere in Asia, Korea's

Kospi

index rose 13.99, or 1.7%, to 835.21, while Taiwan's

TWSE

index rose 32.68 to 8297.77.