Nikkei's 6.4% Plunge Sparks Global Sell-off

Hiruki Nakamura
13 Jun, 2013
New York City

The Nikkei index in Tokyo plunged 6.4% as turbulent market extended volatility in the third week. Markets in Japan are in a bear market territory for the second time in as many weeks and the yen rises as foreign investors sell stocks and unwind the currency hedge.

[R]5:10 PM Tokyo – The Nikkei index in Tokyo plunged 6.4% as turbulent market extended volatility in the third week. Markets in Japan are in a bear market territory for the second time in as many weeks and the yen rises as foreign investors sell stocks and unwind the currency hedge.[/R]

The volatile Japanese markets plunged into a bear market territory as foreign and domestic investors sold shares and unwound the yen-hedge.

The Thursday’s drop in Tokyo was one of many declines in last three weeks after market indexes staged a spectacular rally since November and accelerated gains on April 4 after the Bank of Japan announced measures to double the liquidity in the financial system.

The Nikkei accelerated gains that started on November and built more advance since April 4 and peaked on May 23. However, the Nikkei has pared gains since then and trading has been volatile and at close today the index is down 21% from the peak.

The Nikkei 225 Stock Average plummeted 784.78 or 5.9% to 12,504.54 and Topix index plunged 52.37 or 4.8% to 1,044.17.

The yen strengthened to 93.75 against one dollar in today’s trading. The yen strengthened to the level last seen in April and well below its 4-year peak of 103.73 on May 22.

In the last two weeks, the decline in Nikkei and the rise in the yen have been linked as foreign investors sell stocks and unwind the yen-hedge to protect the gains.

In addition, weakening of global market backdrop has also worsened the sell-off. Only yesterday, World Bank lowered its expectation of global growth to 2.2% from 2.4%. In addition, the bank said India is expected to grow below 6% for the first time in a decade and China is struggling to expand at faster than 7%.

Stocks in Review

Toyota Motor Corp declined 270 yen to 5,590 yen and Honda Motor Co. dropped 155 yen to 3,420 yen and Nissan Motor Co Ltd plunged 59 yen to 979 yen.

Sony slumped 70 yen to 1,930. Canon Inc decreased 110 yen to 3,125 yen and Nikon slid 137 yen or 5.4% to 2,389 yen.

Fanuc Corp plummeted 680 yen to 14,170 yen Softbank Corp tumbled 520 or 9.5% to 4,980 yen.

Seven & I Holdings Co plunged 260 yen or 7.5% to 3,215 yen. Fast Retailing Co. declined 2,700 or 8.6% to 28,550 yen.

Mitsubishi UFJ Financial Group slid 27 yen to 577 yen and Sumitomo Mitsui Financial Group dropped 165 yen to 4,000 yen.

Japan Airlines Co., Ltd. slid 0.4% and the company requested approval from the Japanese Ministry of Land, Infrastructure, Transport and Tourism to lower the fuel surcharge on international tickets issued between August and September.