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Tokyo stocks plunged on Wednesday with the key Nikkei stock index sinking to
a seven-month closing low as the yen's appreciation pummeled exporter shares and
investors' overall sentiment towards the global economic recovery hit rock
bottom.
The 225-issue Nikkei Stock Average fell 188.03 points, or 1.96 percent, from
Tuesday to 9,382.64, marking the fourth straight day of losses and the lowest
close since November 30.
The broader Topix index of all First Section issues on the Tokyo Stock
Exchange shed 10.77 points, or 1.26 percent, to 841.42, posting its lowest close
since the end of November.
Analysts pointed to Japanese shares being offloaded due to slides in U.S. and
European markets overnight as fears mounted that global financial markets would
now be facing intense pressure after data showed a steep fall in U.S. consumer
confidence and a sharp downward revision to China's leading indicators
index.
"The view is spreading among investors that a recovery in the global economy
won't be as easy as people had expected," said one local broker.
"Moves by countries around the world to tighten fiscal policies are behind
the plunge in markets," he said.
"There had been growing moves toward avoiding risky assets and the economic
indicators from China and the United States added to the momentum," said another
Tokyo-based analyst.
Market players highlighted the strong yen as being a catalyst to sell on
Wednesday, but analysts said that investors are become increasingly wary of
riskier assets such as shares as global moves to rein in national debt and the
fiscal restraints countries are imposing to achieve this may ultimately stall
the global economic recovery.
"There is also a growing sense of caution about what will happen when the
effects of 'shots in the arm' wear out," Tsuyoshi Segawa, equity strategist at
Mizuho Securities Co., said, referring to various governments' measures to
tackle the financial crisis.
"When we think about fiscal restraints, we cannot keep on going as is."
Investors, amid such an unsettling and dour market mood, will not take active
positions and the Nikkei, although possibly regaining some of the ground lost in
recent days is not expected to rebound as risk aversion is high and chasing
higher stocks does not present an attractive option, particularly ahead of key
data such as Japan's quarterly survey on corporate sentiment due out on Thursday
and Friday's closely watched U.S. nonfarm payroll report, brokers said.
The yen appreciated against the euro to as much as 107.69 on Wednesday from
108.82 at the close of trading on Tuesday and rose to as much as 88.39 from
88.76 against the U.S. dollar.
"The fact that the euro is staying near a nine-year low shows that fears
about Europe's financial system, which seemed to have run their course, has
reemerged and that's leading investors to avoid risk-taking," said Hiroaki
Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
A strong yen erodes exporter profits when repatriated and Japanese firms
reliant from revenue from overseas become less competitive.
Honda Motor Co. Ltd., an automaker reliant on 80 percent of its sales abroad,
fell 1.9 percent to 2,597 yen and digital camera maker Canon Inc. retreated 1.9
percent to 3,330 yen.
Sony Corp. gave up 1.9 percent to 2,383 yen and industrial robotics maker
Fanuc Inc. retreated 2.2 percent to close at 10,140 yen.
Shin-Etsu Chemical Co. Ltd. tumbled 4 percent to 4,175 yen, the lowest close
since March 2009, as the maker of chemicals and resin was cut to "neutral" from
"outperform" by Mizuho Securities Co.
Mitsui &Co. Ltd. dropped 2 percent to 1,054 yen, its lowest close since
July 2009. The trading house had its credit outlook cut to "negative" from
"stable" by Standard &Poor's Ratings Services on concern it may be affected
by the oil spill in the Gulf of Mexico.
Fellow trader Mitsubishi Corp. lsot 1.9 percent to 1,864 yen.
With nearly 80 percent of stocks falling on the First Section, it was better
news for Nippon Kayaku Co. Ltd. who advanced 3 percent to 765 yen, as the
chemicals maker said its full-year net income was 9.87 billion yen (111.46
million U.S. dollars), compared with 3.72 billion yen (42 million U.S. dollars)
a year earlier, and more than the company's forecast of 9.4 billion yen ( 106.15
million U.S. dollars)
On Wednesday some 1.86 billion shares changed hands on the Tokyo exchange's
First section, up from Tuesday's volume of 1.59 billion, with declining issues
outnumbered advancing ones by 1,334 to 274. |
