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Blue Monday for Tokyo
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October 26, 1998: 5:27 a.m. ET
Nikkei in the red as new short-selling rules, bank fears and poor results bite
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LONDON (CNNfn) - Tokyo stocks began this week as they ended last week, with traders fearing that the government's reform of the banking sector would do little to ease the credit crunch in the Japanese economy. Stocks slid more than two percent.
Elsewhere, it was shaping up as an unremarkable day's trading. Singapore and Hong Kong were down slightly with little change on the Australian and Taiwanese bourses.
Thailand dropped, but only marginally so, as did Malaysia. South Korea was the biggest loser, but even then it was a relatively modest 2 percent..
The Philippines was the day's star, rallying more than 4 percent by the close.
Japan's Nikkei average closed down 301.24 points, more than two percent, at 13,843.46. Nikkei December futures were down 220 points at 13,880.
After a strong performance in the early part of last week, stocks slipped back on Friday and continued to lose ground Monday.
Traders had blamed new short-selling rules that came into effect Friday. But despite a clarification from the Ministry of Finance over the new rules, stocks continued to slide.
Jason James, head of research at HSBC Securities said the market was also weighed down by bad corporate news and fears that the government's bank recapitalization package might not prove effective.
"There has been a bit of a re-think over the last day. People are saying they still don't know how much the injection of money will be. It might not be as big as had been expected and even if it is, it is not going to do anything about the credit crunch," he said.
James also pointed to the poor interim results announced by NEC. "It reminded people that we are likely to enter the interim results season and it's likely to be mostly bad," he said.
NEC's shares lost 64 yen to 880 on the news.
Sakura Bank fell 24 yen to 286 while Sumitomo Trust slid 43 yen to 1,125. But investors reacted positively to news that Daiwa Bank was closing its overseas operations. It rose 13 yen to 213.
Singapore finished little changed from Friday, down just 0.09 points to 1113.50.
Hong Kong closed down 38.84 to 9778.91 in quiet trade.
Trades had held back Friday ahead of a meeting of senior bankers. They decided to leave rates unchanged and lethargy gripped the market as a result.
Core Pacific Yamaichi sales director Terry Cheung said good weekend property sales and expectations that interest rates would be cut soon boosted sentiment.
But with money supply low, unemployment rising and salaries on a downward trend, confidence was limited.
"The market is a bit mixed without much direction," he said.
China-related stocks were boosted by weekend hints from Chinese Premier Zhu Rongji that companies would not be forced into a financial straight-jacket as feared after the collapse of the investment vehicle GITIC earlier this month.
Red chips as a group were up 2.25 percent though H-shares lagged, slipping 0.09 percent.
Guangdong Investment a subsidiary of Guangdong Enterprises, rocketed HK$0.25, or 16.23 percent, to HK$1.79.
Blue chips were fairly quiet with market heavyweight HSBC down HK$3.50 to HK$178.50.
Taiwan shed 5.14 points to end the day at 7,050.32 while Australia added 19.4 points to close at 2,563.3. News Corp. (NWS) added 45 cents to A$10.16.
Korean stocks fell 7.49 points to 373.32 with local investors selling heavily after new figures showed unemployment rising to 8.4 percent of the workforce in September.
Malaysia was down 0.61 to 419.11 despite Friday's budget designed to boost the ailing economy. Fears that interest rates might have to rise to fund tax breaks and weekend riots in support of sacked former deputy Prime Minister Anwar Ibrahim unsettled the market.
Indonesia added 1.896 to close at 315.311. Thailand dipped 2.55 points to 319.02.
The Philippines put on the most impressive performance of the day, soaring 4.10 percent, a healthy 62.42 points, to close at 1,586.40. The peso also strengthened.
ATR Securities deputy head of research Richard Tan, said the market remained encouraged that the U.S. Federal Reserve's recent rate cut was a sign that the world was taking the threat of recession seriously.
This, combined with some local confidence about the Philippines' economic health, boosted sentiment.
"In the short-term the economy is going into recession," he said. "But if you look at 1999 we expect some good to come. The Philippine banking system is relatively strong compared to our neighbors and a stable banking system is a foundation for economic growth." 
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