Lower oil prices and fading concerns about aggressive US interest rate rises had only limited impact on Asian equity markets on Wednesday.

Tokyo was undermined by a steep fall for shares in Kanebo after the household goods group admitted it had uncovered accounting frauds totalling Y150bn over a five year period.

The Nikkei 255 Average fell 0.3 per cent to 11,637.52, its third consecutive decline, while the Topix index was also 0.3 per cent lower at 1,176.39 as investors remained anxious about the outlook ahead of earnings season.

But Kathy Matsui, equity strategist at Goldman Sachs, suggested that while the market was likely to be rangebound in the short-term, microeconomic fundamentals, such as record high returns on equity and record low valuations, would provide longer-term support for stock prices.

Kanebo contributed most to Wednesday’s fall for the Nikkei as it tumbled 13.4 per cent to a four-month low of Y1,291 following the discovery of accounting frauds.

Local press reports claimed that the company’s former management had inflated earnings by about Y200bn over the five years to March 2004 in one of the largest accounting frauds by a non-financial firm.

Investors feared the company, currently being run by the state-backed Industrial Revitalisation Corp of Japan, could, lose its listed status.

Oil-related stocks were weaker, in step with crude prices, after the International Energy Agency said Chinese demand for oil was slowing. Teikoku Oil fell 1.8 per cent to Y773, AOC was 0.8 per cent softer at Y1,553 and Nippon Oil edged back 0.1 per cent to Y768.

Takashimaya, the department store operator, was 3.7 per cent lower at Y1,016 as the market continued to doubt the company`s Y300bn expansion plans for the next couple of years.

Fellow retailer Mitsukoshi shed 4.2 per cent to Y527 after it reported a worse-than-forecast net loss and cut its earnings forecasts for the coming business years.

The dispute between Fuji Television and internet start-up Livedoor appeared to be coming to an end after reports said the two companies were in final talks on a capital and business alliance to end their fight for Nippon Broadcasting System.

Fuji was 1.7 per cent stronger at Y244,000, NBS added 6.3 per cent to Y6,080 while Livedoor jumped 13 per cent to Y331.

Bandai, the toymaker, climbed 5.9 per cent to Y2,340 after Credit Suisse First Boston upgraded the company to ‘outperform’ from ‘neutral’.

Japan Tobaccoadded 2.4 per cent to Y1.3m after a Russian court ruled that a tax case against a unit of the Japanese group could go to an appeal court for review.

Oki Electric Machinery, the telecoms equipment maker, fell 1.8 per cent to Y448 after it was downgraded from “buy” to “hold” by broker KBC Securities Japan on valuation grounds.

Shanghai moved smartly ahead following reports that the government was about to tackle the long-standing problem of vast state shareholdings of listed companies. The composite index rose 2.4 per cent to 1,248.20.

The speculation helped ease fears that stock prices would remain depressed ahead of a clutch of new listings due later this month.

Brokerage stocks led the way higher, with CITIC Securities leaping 9.9 per cent to Rmb5.32 and Hong Yuan Securities up by the daily 10 per cent limit to Rmb3.92.

China Merchants Bank, the country’s biggest lender, rose 1.2 per cent to Rmb9.12.

Hong Kong hit a three-week high, with property stocks spearheading the advance on anticipation of strong demand for apartments in a new high-rise building.

Sun Hung Kai Properties, the city’s biggest developer, rose 2.1 per cent to HK$72.50 as it commenced sales in the 80-storey apartment block. Hang Lung Properties rose 2.2 per cent to HK$11.65 and Cheung Kong added 1.4 per cent to HK$72.

The Hang Seng index rose 1 per cent to 13,799.62.

Manila was hit by worries that a new value-added tax bill expected to be passed by the Senate would generate less income than the government had expected.

The composite index fell 0.6 per cent, to 1,916.58.

Banks were hurt by concerns that any failure to raise taxes sufficiently to cut debt would lead to higher interest rates and weaken demand for loans.

Bank of the Philippine Islands fell 2 per cent to 49.50 pesos while Equitable PCI Bank shed 3.1 per cent to 47 pesos.

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