Nikkei Drops On Bank Stocks

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

Nikkei 225 index fell 2.2% with banking, real estate and industrial stocks leading the decliners. An index of top 85 stocks fell nearly 3% after losing 19% in the last five weeks of trading. Trading companies and metals and minig companies declined sharply. Matsushita fell 5% after Nokia offered to replace 46 million handset batteries made by the company. Asian stocks fell sharply in the region.

[R]7:00AM New York, 8:00PM Tokyo – Asian stocks plunged as fears of American subprime fallout deepened. Banks and brokerage companies fell across the region.[/R]

Asian markets closed lower on the worries that U.S. economy may decline if housing problem spreads. Investors in the last seven years have suffered losses in Worldcom, Tyco, Enron and several other American companies’ scandals. Fearful investors are worried that more losses may be hidden in the balance sheets of banks in America. International investors have never been compensated for these losses. Indonesia led the region with a loss of 6.44% after dropping 2% in the previous session, followed by losses of 4.1% in Philippines, 3.6% in Taiwan, and 3.3% in Australia. Hong Kong fell 2.8% and Japan dropped 2.2%.

In Tokyo trading Nikkei 225 closed 2.2% or 369 points lower to 16,475.61 as evidence mounted that the brokerages companies in Japan and private funds in Australia report losses. Of the 225 stocks in index, 214 closed lower, 10 stocks closed higher and only 1 managed close unchanged. The Topix Index fell 43.31 or 2.6% to 1,594.15 with trading volume of 2 billion shares and 2.9 trillion yen. The banking index of top 85 banks in Japan has fallen nearly 20% in the last five weeks of trading.

Worries persist that the U.S. mortgage market problem may deepen and inflict damage to the banks in Japan. Banks in Japan have reported losses from the subprime loans in the U.S. but reported losses so far have been relatively smaller. Analysts have projected that the Japanese bank exposure to losses in U.S. subprime market is not likely to exceed $10 billon. Mitsubishi UFJ reported that it has 5 billion yen or $42 million in losses at the end of July. Sumitomo Mitsui also said that it has billions of yen losses yet to be determined in the quarter that ended in June 30th. Mizuho Financial Group earlier reported losses of 600 million yen after selling its portfolio of 50 billion yen in subprime holding.

The Bank of Japan drained liquidity from the system for the second day as overnight interest rate fell below its target rate. The Bank of Japan mopping up of liquidity is now lifting yen as traders unwind carry trade and repatriate yen. Yen edged a fraction higher against dollar and euro. One dollar fetched 116.7445 yen and one euro was priced at 157.2009 in the trading.

Trend Micro led the stocks in the index with a loss of 7.4% followed losses of 6.8% in Millea Holdings, 6% decline in Sumitomo Mitsubishi, Toho Zinc, Sumitomo Metals and Mining, Mitsui Sumitomo, and Nippon Sheet and Glass. NGK Insulators led the index with a gain of 3.2% followed by 1.5% rise in Nitto Boseki, Mitsui Chemicals and GS Yuasa Corp. Comsys Holdings closed up 1% and Denki Kagaku, KDDI, Showa Denko edged a fraction higher.

Banks, brokerages, and real estate companies fell sharply for the second day. Mitsubishi UFJ led the bank stocks with a loss of 5.3% after losing similar value in the previous day. Bank of Yokohama, Shinsei Bank Ltd, Chiba Bank, Sumitomo Trust, and Mitsui Trust fell 5% or more.

Nippon Oil, Toho Zinc, Sumitomo Metals, Nippon Mining, and Kobe Steel dropped between 2% and 5%. Seiyu Ltd, grocery retailer fell 10% after reporting losses and lowering earnings guidance for the year.

Matsushita fell 5% after telephone handset maker Nokia offered to replace 46 million batteries made by Matsushita. Several users in Japan and China have reported that batteries have a tendency to overheat and under certain conditions can catch fire