Strong yen spooks Asia

GLOBAL MARKETS

Asian stocks fell from an eight-month high, led by Toyota Motor and Nissan Motor, as the yen strengthened against the dollar and the euro, eroding the value of overseas sales at Japanese carmakers.

"The benefit of the exchange rate to exporters has been reflected in recent share prices,'' said Koji Uchida, who helps oversee $61 billion in assets at Mitsubishi UFJ Asset Management in Tokyo. "The fact that it now seems difficult for the yen to depreciate further prompted some selling of automaker shares.''

Industrial & Commercial Bank of China led the Shanghai and Shenzhen 300 Index's slide from a record after economic reports fanned concern the government will raise interest rates.

Technology stocks gained, led by LG. Philips LCD, after Yahoo! Japan and Stats Chippac, Southeast Asia's biggest chip tester and packager, reported record profits. Japan's Nikkei 225 Stock Average lost 0.3 per cent, while the broader Topix Index slid 0.5 per cent. Measures fell elsewhere in the region, except in the Philippines, Thailand, India and Pakistan.

The Morgan Stanley Capital International Asia-Pacific Index slid 0.2 per cent to 142.16 at 5:48 pm in Tokyo, after earlier gaining as much as 0.4 per cent. The index yesterday rose to the highest since May.

Sony, the world's largest maker of video-games consoles, gained after it said it will charge more for its PlayStation 3 console in Europe.

Toyota, the world's second-largest automaker, declined 1.7 per cent to 8,010 yen. Nissan, Japan's second biggest, lost 1.6 per cent to 1,517 yen. North America accounted for more than a third of Toyota's total sales last year and 43 per cent of Nissan's. The yen recently strengthened to 120.36 a dollar from 121.19 late yesterday in New York. It climbed to 156.19 against the euro from 157.18 yesterday, when it reached an all-time low of 158.62.

A stronger yen means Japanese exporters get less for their overseas sales when they are converted back to local currency while their products become less competitive.

"People bought automakers on hopes that the yen would continue to weaken, but now that the currency has reversed that trend, they are selling the shares,'' said Yutaka Miura, an equities manager at Shinko Securities in Tokyo.

The Shanghai and Shenzhen 300 dropped 3.3 per cent, trimming its gains this year to 20 per cent. China's gross domestic product expanded to 20.94 trillion yuan ($2.69 trillion) after growing 10.4 per cent in 2005.