Asian stocks rebound on Iraq news


The historic summit between North Korea and Japan may also have lifted investor sentiment

TOKYO, Japan -- Japan's Nikkei average shot up 3.08 percent by midsession on Tuesday, led by Canon Inc and other exporters following news Iraq agreed without conditions to readmit U.N. weapons inspectors, and a slide in the yen.

U.N. Secretary-General Kofi Annan announced the potential breakthrough on Monday evening in the United States, allaying fears of an imminent war. The White House reacted sceptically, saying Iraqi leader Saddam Hussein was not to be trusted.

"I'm a bit sceptical about the Iraqi move, but Nasdaq futures took off on the news and we followed suit," said Hiroshi Ariga, deputy general manager at Norinchukin Zenkyoren Asset Management, which oversees 313 billion yen of investment trusts.

The Nikkei was up 3.08 percent or 284.43 points at 9,526.36 to move above the psychologically key 9,500 mark for the first time since September 2. The capital-weighted TOPIX index gained 2.31 percent to 929.43.

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Camera and office equipment manufacturer Canon climbed 5.13 percent to 4,300 yen, underlining an advance for major exporters on the Iraqi news and with the yen trading at three-month lows against the dollar

A softer yen makes Japanese exports more competitive on global markets while boosting the overseas profits of Japanese exporters when converted back to yen.

All Nippon Airways Co Ltd, Japan's second-largest airline, put on 3.55 percent to 292 yen, reflecting hopes a decline in the price of crude oil on the Iraqi concession will lower the company's fuel costs.

More generally stocks rose across Asia, as war fears receded.

Hong Kong's Hang Seng index gained 1.15 percent, or 110.56 points, to 9615 shortly after noon with airline Cathay Pacific Airways enjoying a 4.49 percent gain to HK$10.50.

In Korea the Kospi was 2.45 percent, or 17.24 points firmer at 721.69, while Taiwan's main idex was 2.84 percent (126.76 points) stronger at 4583.92.

In Singapore, the region's largest airline, Singapore Airlines, helped boost the Straits Times index just over half a percent higher by midday.

The Straits Times Index lifted 7.64 points to 1450.25 with Singapore Airlines shares 4 percent higher through the morning at S$10.40.

Fuel costs


Singapore Airlines, the region's largest carrier, got a welcome price surge

In Australia, the S&P/ASX 200 firmed 0.76 percent, or 23.9 points by mid afternoon to 3149.6 percent.

Media giant News Corporation led the way, gaining A43c to A$10.07, a 4.46 percent leap.

Strongly performing Australian airline Qantas also received a boost, jumping 1.98 percent to A$4.120.

In Japan, the transport equipment sector subindex ITEQP, which tracks car and automobile parts manufacturers was the best performing sector, up 4.92 percent.

Investor doubts about the prospect for a peaceful solution to the U.S.-Iraq standoff were evident in airline stocks and other energy-related shares. They rose on a 5 percent decline in oil prices on Tuesday but failed to outperform the market.

Japan Airlines Co Ltd (JAL), the nation's largest airline, rose 2.07 percent to 296 yen, while oil refiner Showa Shell Sekiyu KK tacked on 2.73 percent to 678 yen.

Fuel costs comprise a large portion of the operating costs of airlines and refiners.

Summit talks boost

Some analysts said hopes for Tuesday's summit between Prime Minister Junichiro Koizumi and North Korean leader Kim Jong-il were also underpinning sentiment as a fruitful meeting could help Koizumi's support rating and chances for success on reforms.

Elsewhere, In Seoul Korean Air Lines shares rocketed by 6.72 percent to 14,300 won while rival Asiana Airlines Inc shares climbed 4.32 percent to 2,900 won.

In Taiwan, China Air Lines shares were up by 2.65 percent to T$11.60. Shares in rival Eva Airways rose by 5.83 percent to T$12.70 after gaining the maximum daily limit of 7 percent, fueled partly by a 40 percent increase in its 2002 pre-tax profit forecast.

Malaysian Airline System scrip rose 2.67 percent to 3.08 ringgit.

China's two largest carriers, which are not allowed to hedge most of their fuel costs, joined in the rally.

Top mainland carrier China Southern Airlines leapt 3.49 percent to K$2.225, with rival China Eastern Airlines soaring 5.38 percent higher to HK$0.98.

Reuters contributed to this report.