Nikkei ends week on a down note

Merrill Lynch is encouraged by the prospect of reforms by newly elected Japanese PM Koizumi

By Staff and wire reports

TOKYO, Japan -- Japan's benchmark Nikkei index closed down Friday.

Buyers avoided shaky technology shares, as investors watched a stream of earnings in Japan and a fall on Nasdaq the day before.

Overall Tokyo stocks closed mixed. Reform hopes boosted several lower-priced but promising "old economy" issues, including builders.

Other Asian markets lacked direction. The most technology-sensitive exchanges, such as Taiwan, ended down.

In Japan, the Nikkei average dropped 0.3 percent to finish the week at 13,934.32.

It rose to a three-month closing high the previous day on the election of self-styled reformer Junichiro Koizumi as prime minister.

The broader, capital-weighted Topix index closed up 0.5 percent higher at 1,366.46. Activity was subdued as markets in Japan and Hong Kong approach a holiday.

"People are hesitant to trade high-tech issues and are waiting for their earnings results," said Hiroichi Nishi, general manager of Nikko Securities' products group.

He said a lack of energy leaves little upside room for the major players.

Sony up ahead of earnings shortfall

High-tech bellwether Sony Corp. ended up 1.0 percent at 9,240 yen.

After the market closed, the electronics giant reported its closely watched operating profit rose only slightly for the fiscal year just ended.

It hit $1.83 billion, or 225.35 billion yen, short of Sony's own estimate of 260 billion yen.

Japan's largest cellular-phone maker, Matsushita Communication Industrial Co., took a beating after missing profit targets a day earlier.

Its stock fell 10.05 percent to 6,800 yen. Matsushita expects even tougher times this year, forecasting a 16 percent drop in group operating profit because of continued sluggish global demand.

Old economy stocks get a lift

But gains in lower-priced old economy shares underpinned the market.

Housing builder Haseko Corp. shot up 27.9 percent to 55 yen on a media report saying it managed to record positive net worth for the first time in two years. Haseko's peer Fujita Corp. soared 16.67 percent to 49 yen. Its stronger rival, Taisei Corp., jumped 4.9 percent to 346 yen, extending its gains this week to a hefty 20 percent.

General constructors, shipbuilders and steel makers gained further momentum amid fast-growing hopes that vows of reform by new Prime Minister Koizumi would bear fruit.

U.S. investment bank Merrill Lynch upgraded its outlook of Japanese equities to "neutral" from "underweight" on Thursday. The bank is encouraged by the prospect of structural reforms by Koizumi.

That also gave stocks a boost, especially to lower-priced issues. They tend to see high volatility after the central bank effectively moved to zero interest rates last month.

Hong Kong's Hang Seng rebounds

Hong Kong's Hang Seng index finished up 0.7 percent at 13,386.04.

It rallied in the afternoon, regaining losses in telecom and technology heavyweights.

In morning trade, they succumbed to end of the week profit-taking. Hong Kong's markets are closed for a holiday on Monday and Tuesday.

But China Mobile, China's largest mobile phone company and the Hang Seng's second-largest component, rallied late in the day to close up 1.1 percent at HK$38.40.

Banking giant HSBC Holdings, Hong Kong's largest listed stock, closed up 1.3 percent at HK$99. The stock is regarded to be relatively safe in a volatile market.

Shares of China's largest computer maker, Legend Holdings, fell 2.4 percent to HK$6.20.

Analysts said investors closed out positions in China-linked stocks, locking in recent gains ahead of the holidays and the release of U.S. first quarter gross domestic product data later Friday.

Taiwan's benchmark Taiex index took a beating of almost two percent. Semiconductor stocks sold off after Nasdaq lost 2.1 percent on Thursday.

The Taiex finished down 1.9 percent at 5,416.67. Investors also fretted over a slowing economy in Taiwan.

Taiwan's top economic planning agency said on Friday that its economy slowed in March, for the fourth consecutive month.

In South Korea, the benchmark Kospi index dropped 0.9 percent to stand at 556.63. Samsung Electronics fell 2.9 percent to 217,000 won.

Mobile giant SK Telecom slid 2.0 percent to 216,500 won after state-run Korea Telecom said Thursday it would sell its four percent stake in the company.

Reuters contributed to this report.

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