Nikkei Drops 1.3%, Ruling Coalition Wins Tokyo Election

Hiruki Nakamura
24 Jun, 2013
New York City

The Nikkei in Tokyo turned lower in afternoon trading after stocks in Shanghai plunged more than 5% as cash shortage among banks persisted. Japanese ruling coalition won in local election in Tokyo lifting hopes for its majority in the upper house election in a month.

[R]5:00 PM Tokyo – The Nikkei in Tokyo turned lower in afternoon trading after stocks in Shanghai plunged more than 5% as cash shortage among banks persisted. Japanese ruling coalition won in local election in Tokyo lifting hopes for its majority in the upper house election in a month.[/R]

Stocks in Tokyo declined and the yen fell for the tenth day in a row after China worries sparked an afternoon selloff and dragged Asian markets lower.

The ongoing worries of a cash crunch at Chinese banks contributed to a 5.3% nosedive in the Shanghai Composite Index and prompted fears that the second largest economy in the world may be heading for a slowdown.

The Nikkei 225 Stock Average declined 1.3% to 13,062.78 and the Topix decreased 0.9% to 1,089.64.

Investors also welcomed the win of ruling coalition in Tokyo assembly election and lifted hopes that it will win in an upper-house election scheduled on July 21. The win in the upper-house of Diet will strengthen the ruling coalition and speed up the structural reforms that are needed to accelerate economic growth in Japan.

Markets in Hong Kong dropped 2.2% and in Malaysia, Indonesia, Singapore and India declined between 1% and 2%.

The interbank lending rate in China soared again as cash shortage persisted and rates last week sparked as high as 25% before subsiding to 8%, still higher than 4% average for the year.

Chinese central bank has been keeping hands-off policy and cracking down on the shadow banking that has been fueling lending to real estate developers.

Stocks in Review

China linked companies led the sell-off.

Fanuc Corp declined 2.3%, Daikin Industries dropped 6.6% and Panasonic Corp which generates half of its revenues outside Japan fell 1.9%.

Acom gained 3% to 3,035 yen after the consumer lender said it plans to split its stock 2-for-1.