SMFG, NEC Earning Drag Nikkei Index

123jump.com Staff
01 Aug, 2008
New York City

Stocks in Japan closed lower after weak earnings from Sumitomo Mitsui Financial Group and NEC disappointed investors. For the week, Nikkei 225 index fell 1.8% and in Friday trading lost 2.1%. SMFG reported net income decline of 51% to 58 billion yen as ordinary income declined 5% from a year ago. NEC Corp reported net income fell 50.4% to 483 million yen and revenue decline of 0.7%. Commodities and financial stocks fell in the session.

[R]5:00AM New York, 7:00PM Tokyo - Nikkei falls 1.8% for the week. Stocks on Friday fell on weak earnings report from Sumitomo Mitsui Financial Group and NEC Corporation.[/R]

Stocks in Japan fell on a barrage of negative earnings news, especially from NEC Corp and Sumitomo Mitsui Financial Group.

Market Sentiment

In Tokyo trading Nikkei 225 slumped 2.1% or 282.22 at 13,094.59, dropping 1.8% for the week, and the broader Topix Index fell 2.4% or 30.69 at 1,272.93, slumping 2% in the week.

In the first section of the Tokyo Stock Exchange 20 billion shares worth 2.3 trillion yen were traded and in the second section 278 million shares valued at 6.1 trillion yen changed hands.

Of the Nikkei 225 stocks 30 rose, 190 declined, and 5 were unchanged. Matsui Securities Co led advancers in the index shares with a rise of 6.6% followed by Terumo Corp increasing 5%.

Sumitomo Mitsui Profit Falls 51%

Sumitomo Mitsui Financial Group reported on its Web site yesterday that net income in the first quarter ended on June 30 declined 51% to 58 billion yen from 119 billion yen in the same period a year ago as ordinary income slipped to 951 billion from 1 trillion yen a year ago. Net income in the quarter declined 9.3 billion yen to 472 billion yen.

The lender said it has recorded a net loss on bonds of 30.3 billion yen, which represents an increase of 26.6 billion yen from a year ago after it reduced its bond portfolio on a rise in interest rates.

At Sumitomo Mitsui Banking Corporation credit costs rose as borrowers’ financial conditions deteriorate in the review period.

In addition, the company did not record a reversal of provisions for loan loss as it did in the quarter a year ago. Credit cost increased 59.9 billion yen over the year to 119 billion yen.

On a consolidated basis, SMFG’s total assets as of June 30, 2008 increased 3,517.2 billion yen to 115,473.2 billion yen, compared with March 31, 2008. Net assets amounted to 5,285.5 billion yen, a year-on-year increase of 61.4 billion yen. Shareholders’ equity decreased 4.7 billion yen year-on-year to 3,090.6 billion yen as a result of cash dividends partially offset by a record of net income.

NEC Corporation Profit Falls 50.4% in Q1

NEC Corporation reported on its Web site today that net income in the first quarter ended June 30 fell 50.4% to 483 million yen from 1 billion yen a year ago. NEC Group consolidated sales fell 0.7% from a year ago to 1 trillion yen on a decline in the network systems business, as well as sales in the electron devices business.

Demand in Japan and the U.S. continues to slow on rising raw material and fuel costs.

Gainers & Losers

Matsui Securities Co led advancers in the Nikkei index shares with a rise of 6.55% followed by rises in Terumo Corp of 5.02%, in Hitachi Ltd. of 3.21%, in OJI Paper of 2.74%, and NTT Data Corp of 2.69%.

Minebea Ltd led decliners in the Nikkei 225 index shares with a fall of 17.19% followed by losses in NEC Corp of 16.53%, in Tosoh Corp of 10.66%, in Okuma Corp of 9.95%, and Pioneer Corp of 9.95%.

NEC Corp declined after profits fell by more than 50%.

Komatsu slipped 6.67% after Goldman Sachs Group Inc. lowered its rating on the company to “neutral” from “buy” as machine shipments fell for the first time in five years in June.

Commodity stocks also fell. Inpex shed 7.02% and Nippon Oil plummeted 5.40%.

Financial stocks continued to show weaknesses and investors were further unnerved by reports that Sumitomo Mitsui Financial Group’s first quarter profit slipped 51%. Mitsubishi UFJ Financial Group shed 4.33%, Mizuho Trust & Banking declined 4.14% and Mizuho Financial Group plunged 3.61%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 282.22 or 2.11% to 13,094.59, Hang Seng index in Hong Kong increased 131.50 or 0.58% closed to 22,862.60. ASX 200 index in Australia decreased 73.40 or 1.47% to close 4,904.00. The KL Composite index in Malaysia decreased 3.99 or 0.34% closed to 1,159.10.

The Kospi Index in South Korea decreased 20.90 or 1.31% to close at 1,573.77, SET index in Thailand closed higher 2.34 or 0.35% to 678.66 and JSE Index in Indonesia decreased 55.76 or 2.42% to 2,248.75. The Sensex index in India increased 300.94 or 2.10% to 14,656.69.