Monday March 13, 3:09 am Eastern Time
FOCUS-Japan markets dismiss slip into recession
By Jason Szep
TOKYO, March 13 (Reuters) - Japan's markets brushed aside a relapse into recession on
Monday as stocks crumbled under the weight of tumbling high-tech issues and the yen
gained ground on hopes of a swift turnaround in the economy.
Investors ripped apart Internet-related stocks in a selloff that spilled into bellwether high-tech
stocks such as Nippon Telephone and Telegraph Corp (NTT), shearing 2.8 percent off the benchmark Nikkei 255 index .
``This is the downside of a market depending on one sector,'' said Kunihiro Hatae, general manager at Tokyo Securities.
The Nikkei ended at 19,189.93, down 560.47 points -- its biggest point loss this year.
Data on Monday showing Japan sinking into recession in the last quarter of 1999 had virtually no impact on stocks, while
currency and bond traders seized on positive aspects of the data and official comments pointing to a clear turnaround this year.
The yen clawed its way to a six-week high on the dollar, restrained from further heights by fears of intervention but fired up by
hopes of an economic rebound and talk of a three-way bank merger that could point to a rejuvenated banking sector.
Although gross domestic product figures showed output shrinking 1.4 percent in the December quarter after a one percent
drop in the previous quarter, markets focused on a 4.6 percent quarter-on-quarter jump in private sector capital spending.
``By looking at this strong data, I think the Japanese government probably could achieve as high as 1.5 percent growth in the
January-March quarter,'' said Hideya Kubo, senior economist at NLI Research Institute.
The dollar was resting around 105.69/74 yen from 106.23 in late U.S. trade on Friday.
``Everyone's focused on this year, and rising capex is what you want to see if you want a recovery,'' said Brian Rose, an
economist at Warburg Dillon Reed.
UNCERTANTIES FOR HIGH-TECHS
Stock traders said although high-tech issues were the market's biggest concern -- NTT >, for example, lost 8.4 percent -- the
positive spin on the output data helped cyclical stocks that stand to benefit most from an economic turnaround.
These shares included domestic-demand led industries such as textiles, shipbuilders and transportation -- sectors of the ``Old
Japan'' economy that were left in the dust during last year's frenzy to buy high-tech Japanese ``growth'' shares.
``No one knows when these high-tech issues are going to hit the floor and rebound,'' said Hitoshi Ichio, strategist at Commerz
Securities in Tokyo.
``Investors are thinking it's wiser to shift their money into cyclicals and wait for the market to come to a consensus on valuations
for these Internet and high-tech issues.''
Among the market's biggest losers were Sony Corp and Internet investor Softbank Corp .
Sony slid for the eighth day in a row, dropping 7.6 percent to 24,300 amid the general bailout from high-tech issues and recent
complaints about glitches in its PlayStation2 video game console.
``It's a combination of factors, technical faults with PlayStation2 being just one,'' said Alisa Spicer, a senior analyst at ING
Barings in Tokyo.
Softbank fell 5.04 percent to 94,200, down 48 percent since February 18. Other suffering high-tech shares included Hikari
Tsushin , down 5.9 percent, Fujitsu Ltd , down eight percent, and Hitachi Ltd which shed 12 percent.
Bond futures, which typically rise on signs of weakness in the economy, ended stronger as traders viewed the drop in stocks as
a bad sign for the corporate sector. Key June 10-year JGB futures closed at an intraday high of 131.11, up 0.11 point.