Nikkei Declines on Foreign Funds Outflow and Global Worries

Nigel Thomas
16 May, 2012
New York City

Nikkei index in Japan dropped below 8,800 for the first time in two months on the growing worries in the euro zone and more outflows from international funds.

[R]8:30 PM Tokyo – Nikkei index in Japan dropped below 8,800 for the first time in two months on the growing worries in the euro zone and more outflows from international funds.[/R]

Stocks in Tokyo extended losses and the benchmark Nikkei index dropped below 8,800 in intra-day trading for the first time in two months.

The toxic mix of international worries, global index allocation changes and the outflow of funds by foreign investors added to market decline.

Foreign investors cut their exposure to Japanese stock the most in the last five weeks and the latest survey by Merrill Lynch showed underweight increased to 19% in May from 10% in April and 4% in March.

The rebalancing of the MSCI index also cut exposure to Japanese stocks and traders estimated outflow of as much as $450 million linked to the event.

In the euro zone Greece is expected to head for second election after parties failed to form a unity government after six rounds of negotiations. Voters are expected to give higher proportion of seats to left leaning parties that prefer to cancel bailout terms and eliminate austerity measures.

In addition, exporters were on the decline after a report indicated that lending by the four largest banks in China was flat compared to a year ago in the first two months of May.

The Nikkei 225 Stock Average shrank 99.57 or 1.1% to 8,801.17 and the broader Topix index decreased 8.52 or 1.1% to 738.88.

Stock Movers

Hokuhoku Financial Group, Hiroshima Bank Ltd and Nippon Sheet Glass Co Ltd fell after MSCI All Country World Index removed companies from the index from May 31.

Hankyu Hanshin Holdings Inc and Taiheiyo Cement Corp gained more than 4% after they were added to the index.

Sharp Corp decreased 9 yen to 370 yen.

Kansai Electric Power Company, Inc unchanged to 1,087 yen and Tokyo Electric Power slipped 9 yen to 170 yen.

Toyota Motor closed down at 65 yen to 3,100 yen and Honda Motor Co. plunged 55 yen to 2,600 yen and Nissan Motor Co Ltd decreased 17 yen to 752 yen.

Sony Corp slipped 10 yen to 1,118 yen. Panasonic Corp closed down at 14 yen to 546 yen and Canon Inc declined 35 yen to 3,375 yen.

Olympus Corp increased 10 yen to 1,099 yen, Nikon slides 79 yen to 2,322 yen and Fanuc Ltd tumbled 160 yen or 1.2% to 13,230 yen. Hitachi Ltd decreased 5 yen to 475 yen.

Komatsu Ltd slumped 51 yen to 1,959 yen and Hitachi Construction Machinery Co slides 30 yen to 1,536 yen.

Energy and resources companies declined after crude oil futures fell to a 5-month low and mining and resources companies fell after commodities prices fell to a 2-month low.

Inpex Corp shrank 0.9% to 458,000 yen and Japan Petroleum Exploration Co. plunged 35 yen or 1.1% to 3,070 yen.

Mitsui O.S.K. Lines, Ltd edged down 1 yen to 263 yen, Kawasaki Kisen Kaisha, Ltd rose 2 yen to 132 yen and Nippon Yusen K.K. closed up at 3 yen to 200 yen.

Nippon Electric Glass Co Ltd slides 5 yen to 536 yen and Asahi Glass Co Ltd decreased 15 yen to 550 yen.

Fast Retailing Co. shrank 160 yen to 16,820 yen and J. Front Retailing Co. Ltd fell 3 yen to 377 yen.

Mitsubishi UFJ Financial Group slipped 5 yen to 344 yen and Sumitomo Mitsui Financial Group decreased 8 yen to 2,342 yen. Nomura Holdings, Inc closed down at 4 yen to 269 yen.

Tokyo Tatemono Co., Ltd unchanged to 248 yen and Mitsui Fudosan added 2 yen to 1,263 yen and Sumitomo Realty & Development Co. tumbled 25 yen to 1,668 yen.

Nippon Steel fell 2 yen to 179 yen and JFE Holdings Inc gained 10 yen to 1,297 yen.