Tokyo rallies after upbeat S&P outlook

BANKING stocks, frequently among

Tokyo's

S&P raised its outlook for Mizuho Financial, UJF and Sumitomo Mitsui Banking to stable from negative. It cited the country's improved macro-economic environment and the companies' progress in eliminating bad loans. It also raised its short-term ratings for the trio by a notch.

'The bank groups have been making efforts to reduce the risks in their assets,' S&P said after the close of Tokyo trade yesterday, setting the stage for gains today.

'Supporting factors for the revision to the short-term ratings ... include an improvement in liquidity and a more moderate domestic operating environment,' S&P said, echoing recent statements by many economists that data has pointed to a Japanese recovery.

Mizuho Financial, the world's largest lender by assets, rose 9000 yen or 4.2% to 226,000, UFJ put on 12,000 yen or 3% to 400,000, and Sumitomo Mitsui 13,000 yen or 2.8% to 472,000.

Brokers said the sector was also cheered by the overnight gains on Wall Street - the first advance in five sessions - and by bargain-hunting following the market's recent declines.

There was some respite for exporters, many of which have been weighed down by a fresh resurgence in the yen. Bargainhunters pushed consumer electronics giant Sony up 60 yen or 1.6% to 3740. Canon rose 120 yen or 2.6% to 4800, and Matsushita Electric Industrial traded at 1374 yen, better by nine yen.

JFE Holdings, the steel producer and star performer this year on burgeoning Asian demand, gained ground ahead of results. It added 95 yen or 4.2% to 2385.

The Nikkei 225 firmed 251.10 points to 9865.70. The benchmark is 28% up on its year-low struck in April but has backtracked 13% since peaking for the year last month.

Hong Kong shares were mixed and the tug of war left the Hang Seng little changed, down 0.25 points to 11,872.74.

Some investors were tempted to nibble at shares that are well down from recent highs, but the effect was offset by continued caution elsewhere, especially in banks.

Cathay Pacific Airways, which topped HK$15 last month, clawed back 15 cents or 1% today to HK$14, while developers' bellwether Cheung Kong improved 75 cents or 1.5% to HK$55.50.

Lenders remained weak in a still-jittery atmosphere. HSBC slipped 50 cents or 0.4% to HK$116, and subsidiary Hang Seng Bank gave up 25 cents to HK$97.25.

In Seoul most shares connected with conglomerate LG Group recovered some poise after deep losses yesterday sparked by news that prosecutors were investigating a home shopping division.

LG Electronics led the rebound, up 1300 won or 2.5% at 54,200. The Korea Composite Stock Price Index shed 0.24 points at 771.46.

Australian financial services group AMP continued to ebb as a takeover premium was stripped out. The stock dropped 11 cents or 1.8% to A$5.94.

The All Ordinaries rose 3.6 points to 3192.70.

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