Nikkei Down 2.2%, Banks Decline

123jump.com Staff
19 Jun, 2008
New York City

Stocks in Japan fell on the rising estimate of losses relatd to the U.S. credit market and elevated crude oil prices. Hedge fund manager John Paulson estimated credit market related losses at $1.3 trillion and expects the second half to be tougher for investors. In addition, Citigroup and JP Morgan estimated that the U.S. car sales will decline to a 15-year low. The new estimated lowered the stocks of Japanese auto makers and exporters. Banks, brokers and realty companies fell.

[R]5:00AM New York, 7:00PM – Credit market worries drag stocks in Japan. IHI fined 1.6 billion yen. Crude oil trades at elevated level.[/R]

Stocks in Japan declined as investors braced for higher losses at banks form the credit market. Fears that the U.S. is gradually slipping into a recession on slow consumer spending and a weakened yen further put pressure on exporters.

Carmakers were particularly affected by comments from Citigroup and Deutsche Bank AG that U.S. vehicle sales might decline to a 15-year low.

Market sentiment

In Tokyo trading Nikkei 225 fell 2.23% or 322.65 at 14,130.17, and the broader Topix Index declined 2.4% or 34.04 at 1,375.60.

In the first section of the Tokyo Stock Exchange 10 billion shares worth 1 trillion yen was traded and in the second section 188 billion shares valued at 4.2 billion yen changed hands.

Of the Nikkei 225 stocks 11 gained, 209, declined, and 5 were unchanged. Sanyo Electric led advancers in the index shares with a rise of 3.32% after the Nikkei News reported that the company will double production of nickel-metal hydride rechargeable batteries this fiscal year ending March 31.

Credit market write downs may reach $1.3 trillion

The Financial Post reported yesterday that John Paulson of hedge fund company Paulson & Co. told at a conference in Monaco that banks have written off only one third of total asset write downs so far. He expects more losses and further write downs related to mortgage loans. Paulson & Co manages $33 billion and one of the hedge funds managed by the investment manager returned 600% return in 2007 after it bet on the fall of banks and home builder stocks. The fund uses little leverage to generate returns.

Earlier IMF forecasted that global losses from write downs will reach $945 billion and several executives at J P Morgan, Lehman Brothers and Goldman Sachs indicated that most of the problems in the banking sectors are behind us. However, losses at bank and brokerage houses keep rising.

Paulson said the second half of the year will be worse than the first as economic slowdown continues into 2009, adding that the U.S. is slipping into a recession as falling house prices negatively impact consumer spending.

Paulson forecasted, “There are a lot of problems out there and it will continue to be felt through the year. We don''t see any signs of stabilizing."" And he added that the signs of stress are “accelerating” in the housing market.

IHI faces 1.6 billion yen fine

The Yomiuri online edition reported today that Japan’s Securities and Exchange Surveillance Commission will ask the Financial Services Agency as early as today to impose a 1.6 billion yen fine on IHI Corp for violating the Financial Products Trading Law by publishing false earnings reports.

SESC has since concluded that poor accounting practices at the company resulted in the false statements and “padded profits”.

The shipbuilder submitted an earnings report for the half year ended September 30 to the Kanto Local Financial Bureau that showed a net loss of 2.82 billion yen when infact it incurred a loss of 10.1 billion yen.

Gainers & Losers

Sanyo Electric led advancers in the Nikkei 225 index shares with a rise of 3.32% followed by increases in Inpex Holdings of 2.29%, in West Japan Railway of 1.63%, GS Yuasa Corp. of 1.34%, and Tokyo Dome Corp. of 1.26%.

Sanyo Electric rose on Nikkei News the company will double the production of nickel-metal hydride rechargeable batteries this fiscal year ending March 31.

Mizuho Trust & Banking led decliners in the Nikkei 225 index shares with a drop of 6.54% followed by losses in Daiwa House Industries of 6.27%, in Taisei Corp of 5.99%, in Takara Holdings of 5.89%, and Chuo Mitsui Trust of 5.76%.

Financial stocks fell on comments by John Paulson that global losses to credit-related losses will top US$1.3 trillion. Mizuho shed 3.68% and Sumitomo Trust & Banking declined 4.77%.

Automakers dropped after Citigroup and Deutsche Bank AG noted the U.S. car sales might fall to a 15-year low at 12.5 million, which is 20% below the same month a year ago. Mazda tumbled 5.49%, Nissan tumbled 4.33% and Suzuki edged down 4.05% on the news.

Exporters also declined as the yen strengthened from 107.88 yesterday to 107.61. Sony slid 2.61% and Komatsu slipped 1.24%.

NTT to expand to the Middle East

Bloomberg News reported today that NTT DoCoMo Inc. is in talks with Middle East carriers Qatar Telecom QSC, Emirates Telecommunications Corp. and Saudi Telecom Co. for possible equity partnerships that will give the company a footing in the region as it looks to recharge its growth outside its domestic market where the growth is stagnant.

World markets review

In Tokyo Nikkei 225 Index closed lower 322.65 or 2.23% to 14,130.17, in Hong Kong Hang Seng index decreased 528.19 or 2.26% closed to 22,797.61. In Australia ASX 200 index lower 76.60 or 1.41% to close 5,366.60. In Malaysia KL Composite index decreased 16.20 or 1.34% closed to 1,196.39.

In South Korea Kospi Index decreased 33.41 or 1.88% to close at 1,740.72, in Thailand SET index closed lower 23.28 or 3.04% to 742.46 and Indonesia JSE Index edged increased 8.48 or 0.36% to 2,373.06. Sensex index in India decreased 334.32 or 2.17% to 15,087.99.