Yen Surges; Financials Drag Japan Lower

123jump.com Staff
06 Oct, 2008
New York City

Stocks in Japan fell sharply after the banking crisis in Europe deepened and Germany was forced to bailout second largest real estate lender. Fearful investors worried that exports from Japan are likely to fall as credit market tighten in the U.S. and Europe. Commodities stocks fell.

[R]5:00AM New York, 7:00PM Tokyo- The Bank of Japan injects 1 trillion yen in financial system[/R]

Japan''s market averages dipped the most in four and half years on the growing worries that exports to the wealthy nations will decline. The growing banking crisis in Europe sapped confidence in the sector. Financial stocks and commodity stocks, including shipping lines, slumped as a result.

The European nations leaders struggled to find a regional solution to the rapidly growing European banking crisis. On Saturday, heads of France, Germany, Italy and UK met in Paris to form a regional solution but failed to agree on a cross border bailout plan.

After the meeting, Germany raised its protection to bank deposits and was forced to offer 50 billion in bailout to the second largest lender Hypo Real Estate Holding. The Netherlands seized Fortis operations in the country and Belgium and Luxembourg agreed to sell Fortis operation to France based BNP Paribas SA. Unicredit in Italy was forced to raise capital and offer its current year dividend in stock.

Market Sentiment

In Tokyo trading Nikkei 225 dropped 4.25% or 465.05 to 10,473.09, and the broader Topix Index lost 4.7% or 48.92 to 999.05.

In the first section of the Tokyo Stock Exchange 25 billion shares worth 2.3 trillion yen were traded and in the second section 1.1 billion shares valued at 6.2 billion yen changed hands.

Of the Nikkei 225 index stocks 10 rose, and 215 declined. Shiseido Co. Ltd. led advancers in the index shares with a rise of 2.34% followed by Inpex Holdings increasing 2.34%.

Bank of Japan Pumps 1 trillion Yen

The Bank of Japan today added 1 trillion yen into the money market as part of ongoing efforts to ease lending conditions as credit market losses have tightened lending conditions.

On the overall, the central bank has injected more than 20 trillion yen into the system.
Bank of Japan''s overnight loan call rate was 0.5% before the operation.

Separately the apex bank began its two-day monetary policy meeting today and market watchers opine that the key rate will be left unchanged at 0.5%.

Japan to Tap Uranium from Mongolia

Bloomberg News reported on its Web site today that Japan’s vice trade minister will lead a 50- member delegation to Mongolia on October 8 to hold talks on plans to jointly develop uranium ore reserves.

Japan is heightening efforts to seek alternative supplies of fuel and is currently facing competition from both India and China for the fuel.

The report notes that according to Japan Oil, Gas and Metals National Corp, Mongolia has 62,000 tons of proven uranium reserves and it is believed that it also has untapped areas that may contain as much as 1.39 million tons.

BNP Paribas Acquires Fortis Assets in Belgium and Luxembourg

French bank BNP Paribas reported on its Web site today that it will buy operations of troubled Fortis in both Belgium and Luxembourg, including the international banking franchises for a consideration of 14.5 billion euros.

Under the terms of the deal, BNP Paribas will purchase from the Belgian State 75% of Fortis Bank SA/NV and 100% of Fortis Insurance Belgium, and acquire 16% of Fortis Banque Luxembourg from the Luxembourg State, increasing its controlling interest in Fortis Banque Luxembourg to 67%.

For the banking business in Belgium and Luxembourg, the lender will pay 9 billion euros in approximately 132.6 million newly-issued BNP Paribas shares, while Fortis insurance will be acquired for a cash consideration of 5.5 billion euros.

Consequently the states of Belgium and Luxembourg will become shareholders with 11.6% and 1.1% equity correspondingly, with the former state appointing two board members to join BNP Paribas board.

BNP Pariba''s portfolio now include 1,458 branches located in Belgium, Luxembourg, the Fintro branch network in Belgium, and investment management activities that include former ABN AMRO Asset Management.

Fortis'' units in Belgium and Luxembourg have 3 million and 280,000 retail clients respectively.

Yen Falls

The yen declined by 1.93% from 103.08 to 103.10 against the dollar.

Gainers & Losers

Shiseido Co. Ltd led advancers in the Nikkei 225 index shares with a rise of 3.54% followed by increases in Inpex Holdings of 2.34%, in Daiichi Sankyo of 1.31%, in Kao Corp. of 1.23%, and Bridgestone Corp. of 0.97%.

Hitachi Zosen led decliners in the Nikkei 225 index shares with a fall of 16.16% followed by losses in Clarion Co. Ltd of 15.15%, in Bank of Yokohama of 13.41%, in Chiba Bank of 13.21%, and Sumitomo Osaka of 12.66%.

Hitachi Zosen and other shipping lines declined on fears that demand for raw materials is slowing in sync with the slowing global economy. Kawasaki Kisen slid 9.31% as a result.
Commodity stocks also fell. Pacific Metals tumbled 11.13%, Nippon Light Metals plunged 11.40%, and Toho Zinc plummeted 10.20%.

Financial stocks fell as well on market jitters prompted by the spread of the financial crisis to Europe. Mitsubishi UFJ Financial Group declined 9.23% and Mizuho Trust & Banking slipped 10%.

Sharp Corp. Cuts Profit by 41%

Sharp Corp. today slashed its net profit forecast for fiscal 2008 by 41% to 60 billion yen from 105 billion yen on dropping domestic demand for mobile phones and weakness in liquid crystal display panel prices.

Elpida to Slash DRAM Production Costs by 20%

Nikkei News reported on its Web site today that Elpida Memory Inc. will couple a smaller chip design with the latest 65-nanometer fabrication technology to fit 20% more DRAM on a single 300mm silicon wafer.