Nikkei Index Plunges; NEC, MUFJ Fall

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

Stocks in Japan plunged in Wednesday trading as yen rises and worries of earnings at banks mount. Net profit at MUFJ may be lower than previously estimated. NEC reversed its earlier profit forecast and predicted net loss for the year. Fuji Heavy Industries and Hitachi Construction Machinery dropped.

[R]5:00AM New York, 7:00PM Tokyo - Weak earnings forecasts drags Tokyo. Mitsubishi UFJ Financial Group might report lower-than-forecasted profit.[/R]

Japan stocks plunged 6.8% on reports Mitsubishi UFJ Financial Group might realize lower-than-forecasted earnings and after NEC Electronics downgraded its full year profit forecast to a loss.

Sony, Olympus and Konica Minolta declined as the yen rose to 127.01 from 135.27 against the euro yesterday and fell below 99 yen to a dollar.

Market Sentiment

In Tokyo trading Nikkei 225 fell 6.8% or 631.56 to 8,674.69, and the broader Topix Index declined 7.1% or 67.41 to 889.23.

In the first section of the Tokyo Stock Exchange 8.5 billion shares worth 705 billion yen were traded and in the second section 117 million shares valued at 1.2 billion yen changed hands.

Of the Nikkei 225 index stocks 5 rose and 200 declined. Sumco Corp. led advancers in the index shares with a rise of 3.6% followed by Nitto Boseki gaining 1.3%.

Mitsubishi UFJ Weak Profit

The Nikkei newspaper reported today that Mitsubishi UFJ Financial Group, Japan''s biggest lender, might report lower-than-forecasted net profit of 100 billion yen in the six months ended September 30.

MUFJ had earlier forecasted that profit will rise 5% to 270 billion yen.

The newspaper noted that the lender has increased write downs of shareholdings and may take charges against bad loans in the period.

However the bank will decide on its full year profit forecast after the mark-to-market accounting rules for investment holdings are decided by regulators.

In addition, the lender will pay an annual dividend of 14 yen per share.

NEC Predicts Loss, Reverses Forecast

NEC Electronics Corporation yesterday revised downwards its operating income for the fiscal first half ended September 30 to 1 billion yen from 3 billion yen on a decline in the valuation of inventories. First half sales of semiconductors remain unchanged at 320 billion yen.

The company forecasted net loss in the fiscal year ending March 2009 of 8 billion yen as net sales are expected to plunge by 3.6% to 660 billion yen.

Full year operating income is expected to decline 90% to 1 billion yen from 10 billion yen forecasted earlier, while loss before income taxes is projected to dip by 8 billion yen to 4 billion yen.

In the year, semiconductor sales were revised lower to 630 billion yen from 650 billion yen projected earlier.

NEC in a statement, “As the global economy deteriorates, the semiconductor market will undergo a significant decline and sales of automotive semiconductors, multipurpose microcontrollers, and discrete devices in particular are expected to face much harsher market conditions than originally forecast.”

Gainers & Losers

Sumco Corp. led advancers in the Nikkei 225 index shares with a rise of 3.6% followed by increases in Nitto Boseki Co. of 1.3%, in Pioneer Corp. of 0.5%, in GS Yuasa Corp. of 0.4%, and Kyowa Kirin of 0.4%.

Fuji Heavy Industries led decliners in the Nikkei 225 index shares with a fall of 13.6% followed by losses in Mazda Motor Corp. of 13%, in Hitachi Construction Machinery of 12.5%, in Mitsubishi Chemicals of 12.4%, and Hino Motors of 12%.

Financial stocks, especially regional banks, also dropped on exposure to bad debts as bankruptcies rise. Bank of Yokohama plunged 11.4% and Fukuoka Financial declined 11.30%.

Chipmakers also fell as NEC Electronics revised its full year profit forecast to a loss and as the yen rose to 127.01 against the euro from 135.27 yesterday.

Advantest Corp. shed 11.45% and Olympus Corp declined 11.41%.

Inpex lost 10.98% as crude oil for December delivery slid below $70 per barrel on fears demand will drop as the global economy slows.