LONDON (CNNfn) - Hong Kong stocks rallied nearly 3 percent to a record high Monday, inspired by Friday's sparkling showing on Wall Street and signs that investors are warming to last week's merger between Cable & Wireless HKT and Pacific Century CyberWorks. Tokyo's leading stock index fell below the 20,000 level, led lower by selling of high-tech and Internet issues as investors looked ahead to book closings at the end of March.
Tokyo's Nikkei Average of 225 leading stocks fell 131.19 points, or 0.66 percent, to 19,796.35, dragged down by consumer electronics giant Sony Corp. The maker of the Playstation2 game system slumped 4.7 percent to 29,550 yen, as dealers said the stock's gain last week had more than discounted the successful launch of PlayStation2 over the weekend.
The Sony decline sent other high-tech bellwethers tumbling in its wake. Mobile phone giant NTT DoCoMo slipped 2.2 percent, while Sega Enterprises, a rival games maker to Sony, tumbled nearly 14 percent, continuing a slide begun last Monday after the company lowered its earnings forecast for the year.
Yahoo! Japan fell by its daily limit of 7 million yen, or nearly 5 percent, to close at 140 million yen, while Internet investor Softbank Corp. gave up almost 16 percent, hurt by a lowered stock rating from Nikko Salomon Smith Barney. Another Internet investor, Hikari Tsushin, nosedived almost 21 percent to 141,000 yen.
Local dealers said a sustained Nikkei rise would depend on an upturn in demand for stocks beyond the high-tech high-flyers.
"For the Nikkei to go up further, gains need to become more broad-based," Hiroshi Arano, director of the investment trust management department at Dai-Ichi Kangyo Asset Management, told Reuters.
In Hong Kong, the bellwether Hang Seng index closed up a lofty 473.52 points, or 2.74 percent, at 17,758.76, amid impressive gains across the telecom and technology sectors in the wake of a rally on the U.S. Nasdaq index Friday.
Non-Hang Seng issue Pacific Century CyberWorks, which performed feebly last week after clinching a ground-breaking takeover of telecom operator Cable & Wireless HKT, jumped 6.6 percent to HK$23.35, while HKT, which is 54-percent owned by Britain's Cable & Wireless, gained 4.6 percent to HK$24.80 after languishing last week as investors digested its takeover by PCCW, which snatched it up from under the nose of rival bidder Singapore Telecom.
A strategic alliance with PCCW and a proposal for a stock split sent personal computer maker Legend Holdings rocketing 26.3 percent to HK$62.75, triggering a string of strong performances among so-called "red-chip" Chinese stocks. Another Chinese technology stock, software developer Founder, surged 25.2 percent.
China Telecom rose 3.9 percent to end at HK$79.00, off an intrasession high of HK$80.00.
Internet portal tom.com, controlled by property tycoon Li Ka-shing, leapt 41.2 percent on the Growth Enterprise Market amid optimism for the Internet sector.
property conglomerate Cheung Kong Holdings advanced 5.4 percent and its unit Hutchison Whampoa - two more parts of the Li Ka-shing empire - rose 4.4 percent, rebounding from last week's slump.
Heavyweight international bank HSBC Holdings eased 0.6 percent to HK$86.75.
The Nasdaq index on Friday jumped 160.26 points, or 3.4 percent, to 4,914.77, shattering its previous record of 4,784.08 set Wednesday. For the week, the Nasdaq rose 7.1 percent, and has nearly doubled in the past twelve months as investors have poured money into the technology stocks that are expected to spearhead U.S. economic growth.
The Dow Jones industrial average index of 30 blue chip stocks surged 202.28 points, or 2 percent, to 10,367.2 Friday, capping five straight winning sessions, just a week after falling below 10,000 for the first time since April. The Dow was up 5.1 percent for the week.
The U.S. dollar gained value against the Japanese yen, trading at 107.05, up from its late level in New York Friday of 107.86 yen.
In South Korea, the benchmark Kospi index ended sharply higher as overseas investors snapped up small and mid-sized issues, offsetting selling by domestic investors especially in the electronics shares that led last week's hefty gains. The Kospi closed up 14.50 points, or 1.6 percent, at 909.33.
The Straits Times Index in Singapore ended a fractional 0.1 percent higher at 2,119.97, paring earlier gains in a late selling spree fueled by nagging worries over the U.S. interest rate outlook.
In Australia, the key All Ordinaries gauge closed a marginal 0.2 percent higher at 3,232.1, while in Kuala Lumpur, the market slipped nearly 1 percent to a 5-week low of 940.49, extending Friday's sharp decline. Manila stocks ended up 2.5 percent as the market bounced back for a fourth day from a 15-month low plumbed last week amid allegations of price-fixing by gaming firm BW Resource Corp.
Among smaller markets, Jakarta stocks closed up 3.3 percent, while the weighted index in Taiwan eased 1.6 percent as investors hugged the sidelines amid political uncertainty ahead of a March 18 presidential elections. The index slipped below key support at 9,400 to close at 9,367.91.
Thai shares ended 1 percent lower, weighed down by weakness in bank stocks. 
--from staff and wire reports
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