TOKYO INVESTORS SHRUG OF NORTH KOREA NUKE TEST, CALMING ASIAN MARKETS
TOKYO, OCTOBER 10, 2006 (STAR) (AFP) - Japanese share prices rallied in morning trade Tuesday after early losses, boosting other Asian markets as investors held their nerve after North Korea announced its first nuclear test, dealers said.
They said while Pyongyang's proclaimed testing of an atom bomb had increased uncertainties in the region, investors took the view that economic fundamentals remain sound and there is no need to flee Asian markets.
Wall Street's resilient response also helped calm the region.
The Tokyo Stock Exchange's benchmark Nikkei-225 index rose 55.59 points to 16,491.65 by the lunch break, after opening more than 100 points lower as traders on Asia's largest bourse returned from a long holiday weekend.
The broader TOPIX index of all first-section stocks climbed 2.13 points or 0.13 percent to 1,636.34.
The Tokyo market was closed Monday for a national holiday when North Korea said it had conducted its first nuclear test. The news rattled other Asian markets but investors here gave a relatively calm response when trade resumed.
"There is no need to worry excessively. They have a nuclear capability as a deterrent," said Hiroyuki Nakai, chief market strategist at Tokai Tokyo Research Center.
"Even if North Korea has conducted a nuclear test successfully, it does not necessarily mean they will fire a (nuclear) missile. Considering Japanese economic fundamentals it is natural that investors bought on the dip," he said.
In South Korea, the KOSPI index was up 9.21 points or 0.70 percent at 1,328.61 after losing 2.4 percent on Monday, when the index had been down almost four percent at one point.
Mizuho Investors Securities analyst Masatoshi Sato said Monday's falls on other Asian markets had been behind the brief initial selloff in Tokyo.
"But the influence on US markets was limited and the stock market in South Korea made narrow gains (on Tuesday morning)," he noted.
"The crisis is not spiraling but there are many uncertainties including whether North Korea really conducted a nuclear test," Sato said.
Shares opened higher in Hong Kong, rebounding from Monday's sharp drop as investors took their lead from the generally calm reaction of the US and Japanese markets to North Korea's announcement, dealers said.
"While it's true that many investors were rattled by North Korea's nuclear test ... they realized that it is just one of many factors that affect markets," said Peter Lai, sales director at DBS Vickers in Hong Kong.
"With Wall Street and other overseas markets reacting calmly, many believe that North Korea will have little impact on markets going forward," he said.
US stocks closed with small gains Monday. The Dow Jones Industrial Average rose 7.60 points at 11,857.81 after flirting with its all-time record high set last week.
"Usually the market impact from such events is short-term, although this one may not (be), because North Korea could be abandoned by its closest ally, China," said US-based AG Edwards chief market strategist Al Goldman.
"If so, the Asian region could face increasing instability."
Chief News Editor: Sol Jose Vanzi
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