Sharp Drops in Tokyo and Asia

123jump.com Staff
10 Aug, 2007
New York City

Tokyo index fell more than 2% with indexes in Asia fell across the region. The Central Bank had to step in to provide liquidity and stem the rsiing interest rates. Reserve Bank in Australia joined other central banks in the world to stem the rising interest rates. Shipping lines, banks, financial and brokerage companies stocks led the decliners.

[R]7:00AM New York, 8:00PM Tokyo – Market indexes in Tokyo more than 2% as fears arising from credit worries in the U.S. spread to the Asian markets.[/R]

Nikkei 225 index plunged 406.51 or 2.37% to 16,764.09 at close with financial and brokerage stocks leading the decliners. Topix index dropped 2.96% to close at 1,633.93. Market turnover has reached peak level and today was no different. Daily turnover fell from 5.3 trillion yen to 4.5 trillion yen but still hovered at triple the daily average volume.

The Bank of Japan in a coordinated effort with other central banks in Australia, Europe and the U.S. added liquidity to the market by lending 1 trillion yen. The central bank lent money at 0.49% to fight the rising interest rate which had reached above 0.55%. Reserve Bank of Australia loaned A$5 billion to provide the liquidity in the market. In the overnight trading the European Central Bank and the Federal Reserve Bank in Washington added liquidity in the market to fight the rising interest rates and perceived credit crunch. Central Banks in Indonesia, Philippines, and South Korea expressed willingness to provide liquidity if needed.

According an analyst report cited by Nikkei News, nine largest Japanese financial groups have combined exposure to the U.S. subprime market of 1 trillion yen. The relatively light exposure in the Japanese banking system to the troubled mortgage market in the U.S. did not prevent investors selling stocks in droves.

Mizuho Financial Group, Nomura Holdings, and Shinsei Bank have confirmed exposure to the mortgage market in the U.S.

Of the 225 stocks in the index, 182 declined, 39 gained, and 4 were unchanged. Shinsei Bank led the stocks in the index with a loss of 10% followed by 9.2% decline in Nisshinbo Industries, and 9% fall in Mitsubishi Materials, Komatsu, and NSK Limited. Trading companies Itochu, Marubeni, and Mitsui fell 7% or more. Nippon Suisan led the stocks with a gain of 6% followed by 4% gain in Fast Retailing, and 3.5% rise in CSK Holdings.

Shipbuilding and shipping line operators were hit hard. Mitsui OSK, Sumitomo Osaka, Kawasaki Kisen Kaisha fell more than 4%.

Energy and metal stocks fell sharply in the sell-off in the market. Mitsubishi Materials plunged 9%, Nippon Soda, Nippon Mining, and Mitsui Chemicals dropped 7%, Toho Zinc lost 6%, and Nippon Steel declined 3%.

Trend Micro after surging for the each of three days in a row for 7% declined 2.5%.

Japan Tobacco fell 1.97% to 598,000 yen after rising in the previous. Japan Tobacco reported its first quarter sales of 1.2 trillion yen, a decline of 5.4% from a year ago and net income fell 15.2% to 64.4 billion yen. Domestic sales fell 13% but international sales rose 25.3% limiting the net profit decline. The company revised its sales forecast for the year to 6.41 trillion yen from 4.89 trillion yen and net income was revised to 256 billion yen from 186 billion yen.

Fast Retailing increased 4.2% after soaring 11% in the previous session on the news that the company plans to drop its bid for the U.S. based retailer Barneys New York.