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Tokyo jumps on tax hopes
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November 20, 1998: 5:08 a.m. ET
Interest rate uneasiness drags Hong Kong lower; Singapore rallies on fund buying
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LONDON (CNNfn) - Moves by the Japanese government toward further tax cuts sent Tokyo stocks soaring Friday as the key Nikkei index added nearly 3 percent. But a late afternoon fall in Hong Kong took the shine off an uplifting end to the week in Asia.
Singapore closed up more than 2 percent. Australia, Malaysia the Philippines and Taiwan closed about 1 percent higher while Korea and Thailand climbed about 3 percent.
But Indonesia rocketed. Jakarta stocks put the recent unrest in the city behind them, closing up more than 6 percent.
Japan's benchmark Nikkei average jumped 425.48 points or 2.96 percent to 14,779.94 on fresh hopes for new tax cuts.
"It was a flow-over from yesterday's news that the LDP and the Liberal party are working towards a coalition and as part and parcel of that they are looking at further reductions in tax cuts," said Lehman Brothers chief economist Russell Jones.
Jones played down the impact of the visit by the U.S. president. Bill Clinton made a "conciliatory" speech with "an undercurrent of criticism" which had only a limited effect on the market, he said.
Stocks rose across the board. With a hoped-for cut in the sales tax apparently back on the agenda, auto stocks, electrical companies and foods all performed well. Retailers shined, rising 4.48 percent as a group.
Honda Motor climbed 4.31 percent to 4,600 while Toyota leaped 6.51 percent to 3,190. Department store chain Jusco jumped 7.08 percent to 2,345.
After spending the day in the black, Hong Kong turned south in the last half hour of trading. Traders worried that the association of banks would not cut rates at its meeting which took place after the market closed.
The fears proved unfounded - rates were cut by 25 basis points. But not before the Hang Seng index was dragged lower with banks and property stocks leading the sell-off.
The Hang Seng index dipped 0.78 percent, down 79.94 points to 10,233.36.
"It was due to the fact that a portion of the market was unclear about whether the association of banks would cut rates," said one trader. "But people who sold off at the end were proved wrong."
Heavyweight HSBC Holdings bucked the trend, rising 2.75 percent to HK$186.5. But Hang Seng Bank was down a dollar at HK$67.725.
New World Development lost 0.27 percent to HK$18.8 while developer Cheung Kong plunged 2.55 percent to HK$57.25.
Singapore put on a solid performance to close up 2.38 percent or 31.35 points to 1,347.90.
With local banks gradually cutting their prime interest rates, financial and property stocks were a driving force there as well.
DBS Land was up 5 cents at S$2.31 while bank OCBC was up 10 cents at S$5.35.
But traders said it was not interest rate news but overseas fund buying that buoyed the market.
"Everybody is just chasing stocks," said one. "I think the market is past its fair value. Banks are trading at 1.8 times book. They were at 0.8 times book two months ago."
Australian stocks closed the week up 23 points at 2,703.6 while Taiwan finished up a slightly more impressive 1.1 percent. The Philippines climbed 1.25 percent with Korea rising 2.69 percent to 452.93.
Thailand closed 3.73 percent higher while Malaysia was up 0.65 percent.
Indonesia put on the day's best performance, soaring 6.47 percent, also on International fund buying and lower interest rates.
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