Banks In Japan Plunge, Yen Surges

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

Stocks in Japan fall to a 26-year low on the worries that banks will need to raise more capital. Mitsubishi UFJ plunged 15% after it said that it will raise nearly $11 billion in the next one year. Mizuho Financial and Sumitomo Mitsui dived 15% and 11%. Yen rose to a 13-year high.

[R]5:00AM New York, 7:00PM Tokyo - Nikkei falls to 26-year low on rising yen. Mitsubishi UFJ Financial Group is likely to raise one trillion yen.[/R]

Japan market averages fell to a 26-year low led by exporters and financial stocks as the yen rose to a 13-year high against the U.S. dollar. Mitsubishi UFJ plunged 15%, Mizuho Financial dropped 15% and Sumitomo Mitsui declined 11% on the worries that they may need to raise more capital.

The decline in stocks forced investors to withdraw their positions from emerging markets and unwind their holdings from high-yielding riskier assets abroad.

The yen has risen 19% against the dollar this year forcing Canon and Mitsui O.S.K. Lines to cut their earnings forecast.

Market Sentiment

In Tokyo trading Nikkei 225 declined 6.4% or 486.18 to 7,162.90, falling the most since October 1982, and the broader Topix Index dropped 7.4% or 59.65 to 746.46.

In the first section of the Tokyo Stock Exchange 12.4 billion shares worth 904 billion yen were traded and in the second section of 135 million shares worth 1.5 billion yen changed hands.

Of the Nikkei 225 index stocks 13 rose, 210 declined, and 2 were unchanged. Yahoo! Japan Corp led advancers in the index shares.

G-7 Warns Against Rising Yen

G-7 industrialized nations today warned in an unscheduled terse statement that a volatile yen will adversely affect financial markets and the global economy.

The yen gained to a 13-year high at 92.72 yen against the dollar and surged to 58.36 Australian cents as the drop in equity prompted investors to withdraw their positions from emerging markets.

The yen has risen 19% against the U.S. dollar this year.

Finance Minister Shoichi Nakagawa said the government is prepared to intervene to rein in on a rising yen.

Japan last intervened in the currency market in 2004.

Emerging economies affected by the withdrawal of capital inflows are resorting to the International Monetary Fund for assistance. Ukraine, Iceland, Pakistan and Poland have sought assistance from IMF.

Separately, the Nikkei News reported that Prime Minister Taro Aso ordered government to draft emergency measures to allay fears in the financial markets.

Mitsubishi UFJ to Raise One Trillion Yen in Share Issue

The Nikkei News reported yesterday that Mitsubishi UFJ Financial Group might raise one trillion yen or nearly $11 billion by the end of the year to boost its capital base and provide capital against possible bad loans and increase lending to small businesses.

MUFJ plans to raise the 600 billion in common stock offering in the next 12 months through public offering of common stocks and 400 billion in preferred shares directly to institutional investors in private placement.

The common stocks will be offered internationally.

Japan''s biggest lender’s effort to shore up capital comes in the wake of a $9 billion investment in Morgan Stanley and """"latent losses on its shareholdings"""" from the sharp decline in stock prices.

According to the report, Mizuho and Sumitomo Mitsui are planning issuance of preferred securities.

Japanese institutional investors, such as major life insurers, are the likely buyers of the preferred securities of the three big financial institutions.

Gainers & Losers

Yahoo! Japan Corp. led advancers in the Nikkei 225 index shares with a rise of 6.5% followed by increases in Fanuc Ltd. of 4.9%, in Sharp Corp. of 3.7%, in Kao Corp. of 3.23%, and Astellas Pharmacies of 2.6%.

Yahoo! Japan Corp. and other domestic-related stocks increased as investors sought a haven from stocks vulnerable to the turmoil on the financial markets.

Isuzu Motors led decliners in the Nikkei 225 index shares with a fall of 21.5% followed by losses in Sumitomo Trust & Banking of 18.5%, in Fuji Heavy Industries of 18.1%, in Sapporo Holdings of 18%, and Mazda Motor Corp. of 17.50%.

Mizuho Financial Group fell 14.82% and Shinsei Bank declined 16.32%.

Canon Profit Falls 21%

Canon said today the company''s third quarter profit dropped 21% from a year earlier on a rising yen and declining demand for consumer electronic equipment.

Canon Inc, Japanese electronics goods maker reported third quarter revenues fell 6.2% to 985.9 billion yen from 1.05 trillion yen a year ago. Net income in the quarter fell 21% to 83.04 billion yen or 65.91 yen per diluted share compared to net income of 105.03 billion or 81.93 yen per share, a year ago.

Canon Inc ((CAJ)) in the last one year in New York traded as high as $66.05 in May 2008 and as low as $25.60 in October 2008. Based on the Friday’s trading closing price the company has a market cap of $35.48 billion.

The company also forecasted that full-year profit will slump 23% to 375 billion yen from a year earlier.

Mitsui O.S.K. Lines Cuts Profit Estimate

Mitsui O.S.K. Lines reported today that first quarter revenue for the period ending 16% from a year ago to 1 trillion yen, while ordinary income gained 30% year-on-year to 186 billion yen.

However the company forecasts full-year net income will drop 7% to 195 billion yen as the yen is expected to rise to 97 against the U.S. dollar.

Similarly Kawasaki Kisen slashed its full-year profit forecast by 25% to 27 yen per share.