Gloomy Asian marts shed early gains

Gloomy Asian marts shed early gains

SINGAPORE (Reuters): Most Asian markets failed to hold early gains yesterday, while currencies also wilted as jitters over rising political tension in South Asia and fears of a looming recession hit sentiment.

Pakistan said yesterday it planned no further nuclear tests after its first five atomic explosions on Thursday which brought widespread international condemnation.

But markets on the Indian subcontinent were not calmed by Pakistan's assurances and Bombay's exchange index was down 3.57 percent at 3,589.24 by 0455 GMT. The market later pared some of its losses on short-covering.

"This is panic in the market on account of these tests," said a dealer with a foreign brokerage in Bombay.

Pakistan's main Karachi Stock Exchange (KSE) was closed yesterday owing to a bank holiday declared by the government after Thursday's five nuclear tests, a KSE official said.

Some markets staged an early technical correction amid profit- taking and a rise in U.S. stocks with the Dow closing up 33.63 points at 8,970.20 after losing more than 235 points this week. But the recovery withered off as Asia's weak economic realities set in.

Tokyo stocks fell by midday, hurt by the dollar's steep rally against the yen and a series of Japanese economic indicators, including one showing a record high unemployment rate of 4.1 percent for April, brokers said.

The key Nikkei 225 average was down 27.07 points or 0.17 percent at 15,769.48 points at 0427 GMT, after losing 0.58 percent at its morning close.

"Investor sentiment was watered down by the sluggishness in the economy and the situation in Asia," said Kunihiro Hatae, general manager at Tokyo Securities Co Ltd.

Lee of Vickers Ballas said some Asian stocks recovered after the Japanese yen rose to around 138.45 versus the dollar on profit-taking. This followed comments by finance ministry officials and on talk of Bank of Japan intervention when it surpassed the 139-level amid rising tension in South Asia after Pakistan's nuclear tests on Thursday.

The dollar was quoted at 138.78/138.85 yen at 0444 GMT.

The yen's weakness infected other regional currencies with the rupiah sliding to 11,500/11,700 to the dollar at 0315 GMT.

South Korean stocks rose more than two percent in early trading led by banking shares, brokers said. The Korea Stock Exchange composite stock price index rose 2.19 percent or 7.09 points to 330.18 at 0451 GMT.

Brokers said news that Commerzbank would buy a 30-percent stake in Korea Exchange Bank sparked heavy buying in banking shares with investors hoping that more foreign funds would flow into the banking system.

Hong Kong stocks eased slightly in choppy morning trade ahead of the government's economic report due later, brokers said. The Hang Seng Index shed 14.29 points, or 0.16 percent, to 8,863.65 at 0344 GMT, after hitting a high of 8,949.47 earlier.

Singapore stocks reflected the region's uncertain mood. After rising more than one percent in early trading on a technical rebound, the Straits Times Industrial Index was down 4.05 points at 1,257.57 by midday.

Taiwan share prices fell sharply on concerns over China's arrest of several Taiwan merchants on spying charges and a weak local Taiwan. The Taiwan weighted index lost 2.82 percent or 229.35 to 7,895.15 points at 0400 GMT.

Philippine stocks also tapered lower from its early technical rebound and were down 0.14 percent at 0409 GMT.

Thai stocks had fallen 1.93 percent by 0441 GMT on news that Siam Commercial Bank Plc had approved an issue of 3.41 billion new shares.