Nikkei Drops; Mizuho $11 B Offering

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
11 May, 2010
New York City

Stocks in Japan closed lower after Mizuho Financial plans to raise as much as $11 billion. Investors also worried that a rising inflation in China will crimp exports to the fastest growing economy in the world. Bank of Japan stops injecting funds into the market.

[R]5:00 AM New York, 7:00 PM Tokyo – Stocks in Japan closed lower after Mizuho Financial plans to raise as much as $11 billion. Investors also worried that a rising inflation in China will crimp exports to the fastest growing economy in the world. Bank of Japan stops injecting funds into the market. Japan’s government debt rises to 883 trillion yen.[/R]

The benchmark index in Tokyo declined after a two-day rally that lifted the indexes more than 2.5%. Markets in Asia were calm after the European Union leaders agreed to provide as much as $1 trillion in emergency financial assistance to member nations.

However, investors focused on rising inflation in China and worried that central bank may be forced to increase interest rates. Consumer prices advanced 2.8% in April from a year ago, the fastest increase in nearly one and a half year.

Banks declined after Mizuho Financial Group prepares to raise one trillion yen in a public offering to raise its capital requirement to meet regulatory demand.

Shinsei Bank said yesterday that it expects a net loss of 140.1 billion yen for fiscal 2009 ending in March compared to a profit of 10 billion yen that was earlier projected.

The bank also forecasts revenues to decline 8.7% to 566.3 billion yen.

Japanese Finance Minister Naoto Kan today pledged to keep the fiscal 2011 bond sales below this year’s 44 trillion yen to contain the nation’s record debt. Falling tax revenues and rising costs of supporting the nation’s aging population have put a strain on the nations’ debt.

‘Given sovereign risks, we should do our best to avoid an increase in new bond sales in the next fiscal year as much as possible,’ said Kan at a news conference in Tokyo today.

Sanyo Electric Co, the world’s largest maker of rechargeable batteries plans to invest 120 billion yen over three years to speed up development of new technology, the Osaka-based company said today. The company also plans to invest 50 billion yen in solar-cell operations by March 2013, according to a statement issued by the company.

Toshiba Corp, Japan’s largest memory chip maker expects the profits to quadruple by year ending 2013, as the company plows in 1.3 trillion yen for expansion, including 50 billion yen on solar power systems, Tokyo-based Toshiba said in a statement on its mid-term business plan released today.

In Tokyo trading Nikkei 225 Stock Average fell 1.1% or 119.6 to 10,411.10, and the broader Topix Index dropped 1.3% to 932.10.

In the first section of the Tokyo Stock Exchange 12.1 billion shares worth 822 billion yen were traded and in the second section 190 million shares valued at 2.6 billion yen changed hands.

Of the Nikkei 225 index stocks, 50 rose, 164 fell, and 11 were unchanged. Tosoh Corp. led gainers in the index shares with a rise of 3.9% followed by Sumitomo Heavy Industries gaining 3.9%.

BoJ Stops Injecting Funds into System

Bank of Japan today discontinued its money market operations through which it pumped fresh funds into the market for the first time in three days, according to Nikkei news.

In the two days through Monday the central bank implemented same-day market operations to provide 2 trillion yen.

Government Debt Rises to 883 trillion yen

Japan’s Ministry of Finance reported today that the outstanding balance of the government’s debt rose to 882.9 trillion yen at the end of fiscal 2009 through March 31 as Japan issued more bonds.

Per capita GDP also increased to 6.93 million yen.

The national debt is estimated to soar to 973 trillion yen at the end of fiscal 2010 on declining tax revenues and increased national budget expenditure.

Shinsei Bank Expects 140 billion yen Net Loss

Shinsei Bank estimated yesterday a group net loss of 140.1 billion yen for fiscal 2009 from a profit of 10 billion yen forecasted earlier on rising loan loss reserves for the consumer finance business and real estate.

Revenues are estimated to drop 8.7% to 566.3 billion yen, while the pretax loss of 72.6 billion yen is now expected from an earlier estimated profit of 20 billion yen.

Nikkei 225 Stock Average Movers

Tosoh Corp. led gainers in the Nikkei 225 index stocks with a rise of 3.9% followed by Sumitomo Heavy Industries 3.9%, Fanuc Ltd. 3%, Takashimaya Co. 2.3%, and Nippon Suisan 1.9%.

Taiyo Yuden led decliners in the Nikkei 225 index stocks with a fall of 5.6% followed by Fujikura Ltd. 5.5%, Fuji Electric House 5.3%, Showa Denki 5.3%, and Furukawa Electric 5.1%.

Other Movers

Stocks linked to China exports, shipping and trading companies and banks led the decliners.

Mitsubishi Corp dropped 2.5% to 2,075 yen and trading company Marubeni Corp fell 2.6% to 528 yen.

Mitsubishi UFJ Financial Group Inc dropped 1.7% to 460 yen and Sumitomo Mitsui Financial Group plunged 3.6% to 2,815 yen.

Mizuho Financial Group Inc dropped 4.7% to 163 yen after Yomiuri newspaper reported that the bank plans to raise as much as 1 trillion yen in public offering to raise capital to meet reserve requirements.

Shipping companies traded lower after freight rate index in London traded volatile. Mitsui O.S.K. Line Ltd declined 2.3% to 646 yen and Kawasaki Kisen Kaisha Ltd declined 1.6% to 369 yen.

Sumitomo Heavy Industries Ltd rose 3.9% to 593 yen after it reported higher than expected earnings and estimated current fiscal year earnings of 16.5 billion yen.