Tokyo drags Asia to lower close

Japan's markets opened up after a strong showing for Koizumi this wekend, but weak production figures dragged stocks to a fresh 16-year low

By staff and wire reports

HONG KONG, China - Asian stocks saw little joy from the strong showing by Japan's ruling coalition in this weekend's elections.

Japanese stocks thudded to a new 16-year low. Poor industrial-production numbers for June worried the market.

Investors are now waiting to see how serious Prime Minister Junichiro Koizumi will get with reforms.

Stocks also fell in Hong Kong and South Korea. But Australia, the second-largest Asia-Pacific market, rose.

Taiwan's exchange was shuttered, as Typhoon Toraji roared past the island on its way to the Chinese mainland. The storm is blamed for at least 22 deaths.

Nikkei at lowest close since January 1985

In Japan, broad-based selling dragged the benchmark Nikkei down 1.85 percent. It closed at 11,579.27, its lowest since January 7, 1985.

The broader Topix index finished down 1.33 percent at 1,168.51.

Mizuho Holdings Inc., the world's biggest bank by assets, fell 2.1 percent to 468,000 yen. Investors feel Koizumi will push ahead with plans to force Japan's banks to write off bad loans over the next three years.

Traders said Mizuho also faced pressure after weekend reports it expects loan-loss charges to soar by about 50 percent in the year to next March.

Japan's industrial output dropped 0.7 percent for June, much more than expected, a government ministry reported Monday.

The news forced a sudden weakening of the yen, which moved to 124.65/70 to the dollar, from around 123.50 on Friday.

Last week's shock 90 percent profit drop from high-tech bellwether Sony Corp. added to the skepticism with stocks.

Sony extends Friday's losses, hits techs

Sony shares extended Friday's 11.4 percent drop with a 6.9 percent dip to 5,830 yen.

That pessimism has spilled over to other tech stocks.

Keyence Corp. was punished after the sensor maker reported weak earnings on Friday. Keyence stock tumbled 12.5 percent to 18,300 yen.

Memory chip testing device maker Advantest Corp fell 4.4 percent to 8,610 yen, a low for the calendar year.

Chip and computer makers NEC Corp. and Fujitsu Ltd. both resisted the slide, scoring rare gains despite weak earnings reports on Friday.

NEC closed up 2.0 percent at 1,560 yen. Fujitsu inched up 0.18 percent to end at 1,106 yen.

But like Sony, they have been in a sharp downtrend since the start of the year.

Australia ends up on defensive stocks

In Australia, the benchmark S&P/ASX 200 index ended up 0.8 percent at 3,316.6. But investors were still watching the weakness in Japan, a key export market.

Miner BHP Billiton fell as low as A$9.32 on the weak production data in Japan but recovered to close up five cents at A$9.54. Rio Tinto was up 12 cents at A$32.80.

The market's biggest stock, media group News Corp., had a strong showing. It rallied 3 percent to A$17.98, as investors showed enthusiasm for its acquisition of U.S. broadcaster Chris-Craft.

Defensive banking stocks also had a good showing. Australian investors have been buying defensive stocks as economic prospects worldwide look increasingly gloomy.

In New Zealand, the benchmark NZSE-40 Capital index rose 0.02 points, insignificant in percentage terms, to end at 2,067.24.

Hong Kong hurt by U.S. GDP

Weak U.S. economic data on Friday drove Hong Kong's stocks down. The U.S. economy grew at its slowest rate in eight years last quarter, rising just 0.7 percent.

The benchmark Hang Seng index closed off 0.8 percent at 12,086.66. Hong Kong's markets, with a currency and interest rates pegged to the United States, march in close step with American markets.

Sun Hung Kai Properties, Hong Kong's biggest property developer, fell 1.9 percent to HK$66.25.

China's B share markets, open to overseas investors, also lost ground. Shanghai's B share index was off 3.5 percent at 176.623 and Shenzhen ended down 2.2 percent at 284.95.

In South Korea, the benchmark Kospi index closed down 1.4 percent at 533.53.

The country's largest carmaker, Hyundai Motor, fell 4.6 percent to 21,900 won. Kia Motors, which it controls, also dropped, down 2.6 percent to 8,450 won.

The market's biggest stock, memory chipmaking No. 1 Samsung Electronics, closed flat at 185,500 won. But beleaguered chipmaker Hynix Semiconductor, fell 30 won to 1,335 won.

Stocks were up in Singapore, with the Straits Times index up 1.0 percent at 1,655.99 in afternoon trade. But volume was thin.

Reuters contributed to this report.