Stocks in Asia, Japan Fall

123jump.com Staff
15 Jul, 2008
New York City

The Bank of Japan left its key rate unchanged at 0.5%. The central bank cited rising inflation pressure and weak economy. Financial institutions in Japan estimated exposure to debt issued by Fannie and Freddie of $44 billion. Sumitomo Realty led the decliners in Nikkei 225 index with a loss of 6.5% followed by declines in Sumitomo Mitsui, Tokyu Land Corp, and Mitsubishi UFJ Financial Group.

[R]5:00AM New York, 7:00PM Tokyo - The BOJ keeps key rate at 0.5%.[/R]

Japanese market averages declined led by financial stocks on speculation that a rescue plan by the U.S. Federal Reserve of mortgage lenders Fannie Mae and Freddie Mac reflected deep-seated problems in the U.S. financial system.

Exporters also fell on a rising yen.

Market Sentiment

In Tokyo trading Nikkei 225 dropped 1.96% or 255.6 at 12,754.56, and the broader Topix Index shed 2.2% or 27.60 at 1,253.12.

In the first section of the Tokyo Stock Exchange 19.2 billion yen worth 1.9 trillion yen were traded and in the second section 328 million shares valued at 5.8 billion yen changed hands.

Of the Nikkei 225 stocks 15 rose, 204 declined, and 6 were unchanged. Fast Retailing led advancers in the index shares with a rise of 3.19% followed by Fujikura Ltd increasing 2.20%.

BOJ Keeps Rates on Hold

The Bank of Japan reported today on its Web site that it has kept its key rate on hold at 0.5% as slowing growth and mounting inflationary pressures take their toll on the economy.

The bank also forecasted that the economic growth of 1.2% this fiscal year from 1.5% projected in April, while core consumer prices are estimated to increase 1.8% from 1.1% previously projected.

Separately, the bank under its “Framework for the Conduct of Monetary Policy” said following each monetary policy meeting (MPM) a summary of the assessment of economic and price situation from """"two perspectives"""", and the Bank''s thinking on the future conduct of monetary policy will be communicated along with the policy decision.

Also the monthly report of recent economic and financial developments will be released on the first business day following the MPM as a supplement.

In addition, minutes of the meeting will be released after the subsequent meeting upon approval. Erstwhile, they were approved either at the subsequent meeting or meeting after next depending on the meeting schedule.

US to Inject $15 billion in Fannie and Freddie

The Times Online reported today on its Web site that the US Treasury secretary Henry Paulson is working on plans to inject $15 billion of capital in Freddie Mac and Fannie Mae to prevent the current turmoil and restore confidence in the mortgage lenders.

Through the mooted plan, the government will receive a new class of shares in exchange for capital, and the capital injection will enable the lenders to use the Federal Reserve’s discount window.

Also the funding will allow Freddie and Fannie to buy mortgages from America’s commercial banks, and resell to bond investors through securitizations.

The U.S. government implicit guarantee on the company’s debts allows it to raise money cheaply, making mortgages cheaper to finance for US banks.

Freddie Mac successfully raised $3 billion short-term debt in the U.S. on Monday with more than average interest in the debt offering.

Gainers & Losers

Fast Retailing led advancers in the Nikkei 225 index shares with a rise of 3.19% followed by rises in Fujikura Ltd of 2.20%, in Denki Kagaku of 1.76%, in Mitsubishi Paper of 1.14%, and Fuji Heavy Industries of 1.09%.

Sumitomo Realty led decliners in the Nikkei 225 index shares with a drop of 6.47% followed by losses in Sumitomo Mitsui of 6.11%, in Tokyu Land Corp. of 5.76%, in Mitsubishi UFJ Financial Group of 5.32%, and Mitsumi Electric Co of 5.30%.

Sumitomo Realty and other realty stocks fell as the Bank of Japan kept its rates on hold.

Financial stocks fell as a mulled rescue plan by the Federal Reserve raised fears of further turmoil in the financial sector. Also Japan''s three biggest lenders said today they hold 4.7 trillion yen ($44 billion) in debt securities issued by U.S. government-backed mortgage finance companies, including Fannie Mae and Freddie Mac, and by U.S. federal agency GNMA, as of March 31.

Mizuho Financial Holdings shed 5.02%, Nomura Holdings declined 4.70% and Mizuho Trust & Banking plunged 4.55%.

Exporters fell as the yen rose to 107.75 from 106.54 against the dollar. Mazda Motors tumbled 2.98% and Toyota Motor Co. declined 2.50%.