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Tokyo sprints 296 points
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June 1, 1999: 4:58 a.m. ET
Talk of a sales tax suspension, later dismissed, drives Nikkei; HK follows suit
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LONDON (CNNfn) - Japanese shares spurted nearly 300 points Tuesday amid talk of a suspension in the country's sales tax that was subsequently denied by Tokyo officials.
Hong Kong stocks followed Asia's biggest market higher as traders waited for Wall Street to chart its next course.
A news report that the government was poised to suspend the country's 5 percent consumption tax propelled a 1.84 percent rise in the benchmark Nikkei 225 index to 16,408.50, a gain of 296.85 points.
The Nikkei held on to the sharp advance even after the official denial as investors speculated that the government's junior coalition partner, the Liberal Democrat party, may continue to press for abolition of the sales tax in the near future.
Strides in the telecom sector, which benefited from ratings upgrades, underpinned the run-up in Japanese shares. Japan Telecom leapt 5.4 percent to close at 1.77 million yen after Nikko Salomon Smith Barney Securities raised its rating on the company to "buy" from "neutral".
Hong Kong shares emerged from the morning session virtually flat, but marched up in the afternoon, galvanized by Tokyo's gains. Wall Street and London markets were closed overnight for public holidays.
Hong Kong's Hang Seng index closed up 216.44 points, or 1.78 percent, at 12,363.56.
Local analysts said that this week's tenth anniversary of Beijing's crackdown on pro-democracy demonstrators in Tiananmen Square could weigh on morale.
"Investors are trying not to build up big positions this week," Dennis Leung, a research manager at J&A Securities in Hong Kong, told Reuters.
Telecom stocks performed especially well in Tokyo on a day punctuated by a series of company ratings upgrades and a fresh bid by Nippon Telegraph & Telephone Corp. for rival International Digital Communications Inc., or IDC.
NTT stock added 3.3 percent to 1.24 million yen as investors reacted to the offer, which dealt a setback to a rival effort by Britain's Cable & Wireless (CW.) to take control of IDC, a leading long-distance carrier.
The telecom sector was up nearly 3 percent in Tokyo. DDI Corp. and fast-growing NTT Mobile Communications both rose more than 4 percent.
Daiwa Bank disclosed Tuesday that it had 1.16 trillion yen in problem and questionable loans at the end of March, becoming the third major Japanese financial institution to reveal bad loans after Fuji Bank and Fuji subsidiary Yasuda Trust and Banking Co. The figures represents just over 10 percent of the bank's total outstanding loans.
Daiwa stock jumped 5.4 percent to close at 253 yen in Tokyo Tuesday.
Sega Enterprises Ltd. said Tuesday it planned to reduce the cost of its Dreamcast game console, from 29,800 yen ($237) to 19,900 yen. The company also posted a loss of 42.88 billion yen in the business year ended March 31, down from a loss of 35.64 billion a year earlier. Sega stock slipped 1.55 percent to 1,910 yen.
In Hong Kong, Cathay Pacific said Tuesday it had canceled 37 flights as pilots continued to call in sick in a festering pay dispute. The tussle heated up Tuesday as the pilots' union threatened to call a strike vote in the event any pilot is fired for refusing to cede to management's pay proposals.
The strike has grounded 25 percent of the airline's flights. Cathay stock gained HK$0.25, however, to KH$10.90 amid a technical bounce that followed heavy selling of company shares Monday.
Bank of East Asia said Tuesday it had presented a potential investor for embattled Philippine Airlines, whose rehabilitation plan is contingent on the airline's producing $200 million in new equity by June 4. Bank of East Asia stock gained HK$0.95 to HK$17.900.
Singapore's Straits Times index was up 0.6 percent in late trade, though the property sector suffered a setback amid reports that wage cuts could eat into home sales. The index added 11.25 points to 1,915.11 in the afternoon.
Philippine stocks ended nearly 1 percent higher as lower Treasury-bill rates whetted investors' appetites for property stocks. Seoul's Kospi gained 2.4 percent, making it the region's leading gainer of the day, topping Thailand's 2.36 percent run-up on gains in telecom and construction stocks.
Malaysian shares ratcheted up 1.6 percent in late trade amid a bounce in so-called "penny" stocks.
Australia's All Ordinaries index finished 0.5 percent higher, at 2,915.6 amid thin trade after public holidays Monday on Wall Street and in London.
Jakarta stocks were off nearly 1 percent as banking issues hogged the spotlight against the backdrop of a major recapitalization program.
--from staff and wire reports
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