English/Nat
Japanese stock prices fell sharply on Friday in line with an overnight plunge on Wall Street.
The U-S dollar dropped against the yen.
But analysts still say there are signs Japan is emerging from the economic doldrums.
Meanwhile, in Hong Kong the Hang Seng Index was down two per cent by the midday break on Friday.
Analysts say another fall might be on the way if Wall Street plunges further on Friday.
Tokyo stock prices fell sharply on Friday morning.
The market suffered as investors dumped export-oriented shares such as telecommunications and electronics issues after their U-S counterparts fell sharply in New York.
On the stock market, investors worried about a possible slowdown in the U-S economy following Thursday's plunge in New York stock prices.
The Dow Jones industrial average sank 235.23 points on Wall Street overnight, its worst single-session decline of the year and its lowest level since April 20.
Analysts in Tokyo say the Nikkei Index drop reflected concern over the country's economy.
SOUNDBITE: (English)
"The drop in the stock market is I think, mainly due to the fact that people are still very uncertain about what is going to happen, so many investors are worried that perhaps the economy is not going to recover, and I think it reflects these worries."
SUPER CAPTION: Richard Werner, Managing Director and Chief Economist, Profit Research Centre
Investors were also discouraged by a stronger yen against the dollar.
A higher yen makes Japanese exports more expensive abroad and thus less competitive, cutting into earnings at export-led Japanese companies.
But analysts seem positive the worry will prove unfounded, and that the Nikkei Index will prosper.
SOUNDBITE: (English)
"The economic fundamentals are quite clear. The Japanese economy is beginning to emerge from its longest post-war recession and we have the first signs of a fundamental full-blown economic recovery, and of course, that is extremely positive and bullish for Japanese stocks. I think Japan's Nikkei-225 Index is going to break through 20-thousand within the coming calendar year."
SUPER CAPTION: Richard Werner, Managing Director and Chief Economist, Profit Research Centre
Later on Friday, domestic institutional investors began buying shares seen with strong earnings potential, pulling the market off its lows.
In Hong Kong, it's been six months since the Hang Sang Index fell below the psychologically important barrier of 12-thousand points.
And although at midday closing, it had made a slight recovery, it had still plunged two per cent.
The benchmark Hang Seng Index was down 249-point-31 points to 12059-point-22.
Investors are increasingly wary about a rise in U-S interest rates in the coming months.
Participants said this may lead to a corresponding move in Hong Kong rates or at least eliminate hopes for another local cut.
SOUNDBITE: (English)
"The Hong Kong index has fallen more than 2.5 per cent to its lowest level in 6 weeks mostly because Wall Street plunged overnight but also there's a lot of fear recently that Hong Kong won't be able to cut interest rate again, because there's concern that the US will have to raise interest rates which means the possibility of cutting
interest rate locally is pretty much fading."
SUPER CAPTION: Kirsti Hastings, Dow Jones News Wire
They warn another sharp fall could be on the way.
SOUNDBITE: (English)
"Yeah, because the local market pays a lot of attention to US the US market, everyone is concerned that the US market is much too over-valued and they have been anticipating a fall and now finally it fell more than 200 points, it's one of the biggest drops so far
SUPER CAPTION: Kirsti Hastings, Dow Jones News Wire
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