SMFG Investment in Goldman; Aso Next PM

123jump.com Staff
24 Sep, 2008
New York City

Sumitomo Mitsubishi will invest as much as 100 billion yen or $1 billion in Goldman Sachs after Warren Buffett agreed to invest $5 billion in the recently converted bank. Taro Aso is elected as the fourth prime minister in less than two years in Japan but elections are likely in less a year.

[R]5:00AM New York, 7:00PM Tokyo - Sumitomo Mitsui Financial Group to spend 100 billion yen in Goldman Sachs. Taro Aso is elected as the next prime minister of Japan.[/R]

Stocks in Japan rose marginally led by financial stocks on news that Sumitomo Mitsui Financial Group will invest 100 billion yen in Goldman Sachs.

Market Sentiment

In Tokyo trading Nikkei 225 gained 0.2% or 24.44 to 12,115.03, and the broader Topix Index slumped 0.1% or 0.72 to 1,167.97.

In the first section of the Tokyo Stock Exchange 20.3 billion shares worth 2.3 trillion yen were traded and in the second section 540 million shares valued 4.9 billion yen changed hands.

Of the Nikkei 225 stocks 113 rose, 102 declined, and 10 were unchanged. Furukawa Electric led advancers in the index shares with a rise of 12.31% followed by Shionogi Co rising 7.57%.

Sumitomo Mitsui to Spend 100 billion yen in Goldman

Kyodo News reported on its Web site today that Japan’s third biggest bank Sumitomo Mitsui Financial Group will invest a total of 100 billion yen in troubled U.S. investment bank Goldman Sachs. Separately, the Nikkei News reported that Sumitomo Mitsui will make a final decision after Goldman Sachs decides the size and terms for the share offering today.

Berkshire Hathaway Inc controlled by Warren Buffett said it will invest $5 billion in the recently converted depository banking institution. Goldman has agreed to sell preferred stock in the company that yields 10% and increase its total capital offering to $10 billion.

Japanese financial institutions are increasing investing in U.S. banks and brokerages that have been caught up in the current credit market crisis. Recently, Nomura Holdings Inc purchased Lehman Brothers Holdings Europe, Asia and Middle East investment banking operations.

In addition Morgan Stanley and Mitsubishi Financial Group, Inc. entered into a nonbinding letter of intent to invest between 10% and 20% of the total outstanding common stock of Morgan Stanley on a fully diluted basis, at a price determined after a due diligence.

However, the deal is subject to regulatory approval.

Taro Aso Elected Prime Minister

The leader of the Liberal Democratic Party Taro Aso has been elected as the new Prime Minister to replace Yasuo Fukuda.

Japan has been mired in a debate of privatization, rising food and energy inflation and stagnant wages. More than half of economic growth is dependent to word markets exports. Mr. Aso, 68 years of age will be the fourth prime minister of Japan in two years.

Te Liberal Democrat Party has ruled Japan for more than five decades but recently has slipped in popularity after a series of scandals and mismanagement. The information about several million members in the pension plans was lost and construction industry projects rely heavily on the political projects.

Shoichi Nakagawa, 55 years of age was selected as finance minister. Mr. Aso hopes that his cabinet formed of familiar faces will help him to fight the next election that may be called as early in less than a year. Mr. Aso’s tenure may be shorter than his two predecessors as his party battles for more seats in the next election and face voter’s skepticism.

Gainers & Losers

Furukawa Electric led advancers in the Nikkei 225 index shares with a rise of 12.31% followed by increases in Shionogi & Co. of 7.57%, in Tokyo Dome Corp. of 7.10%, in Sky Perfect JSAT of 6.93%, and West Japan Railway of 6%.

Tokyu Land Corp. led decliners in the Nikkei 225 index shares with a fall of 8.25% followed by losses in Sumitomo Osaka of 5.76%, in Daikin Industries of 5.56%, in Konica Minolta of 5.50%, and Mitsubishi Corp. of 5.46%.

Realty stocks plunged after Re-Plus Inc., a real estate fund service company, said it has filed to begin bankruptcy procedures, with debt totaling 32.57 billion yen as of today.

Daiwa House Industries slumped 4.86% and Mitsubishi Estate Co. of 4.76%.

Shipping lines slid after the Baltic Dry Index shed 3.4%. Mitsui O.S.K. Lines lost 4.77% and Nippon Yusen dropped 3.94%.