Tokyo Stocks Drop 1%

123jump.com Staff
04 Dec, 2008
New York City

Tokyo stocks fell 1% on the worries that automakers in Japan will suffer if GM and Chrysler are forced to seek bankruptcy protection. Separately, Profits at Japanese companies dropped 22.4% in the three months to September. Yen dropped against dollar but remains at the highest level for the year.

[R]5:00AM New York, 7:00PM Tokyo - Company profit drop 22.4% in the three months to September.[/R]

Stocks in Japan fell 1% on news that U.S. two biggest carmakers- General Motors and Chrysler LLC- will opt for a pre-arranged bankruptcy as a last resort to get a bailout from the government. Automakers in Japan fell.

Also investor sentiment was weakened by a government report that showed that local companies cut capital spending in the third quarter.

In Tokyo trading Nikkei 225 index fell 1% or 79.86 to 7,924.24, and the broader Topix Index shed 1.3% or 10.31 to 788.88.

In the first section of the Tokyo Stock Exchange 7.9 billion shares worth 582 billion yen were traded and in the second section 197 million shares valued at 1.1 billion yen.

Corporate Profits Drop 22.4% in Q3

Ministry of Finance in Japan reported today that companies’ pre-tax profit dropped the most in seven years by 22.4% to 10.32 trillion yen in the three months ended September as conditions in the global financial market continued to deteriorate.

Pretax profits for manufactures slipped 27.6%, while profits for non-manufacturers plunged 18.5%. Capital spending also dipped 13% to 12.10 trillion in the quarter from the comparable year-ago period.

Capital spending excluding software fell 13.3%.

Manufacturers investments on plant and equipment plummeted the most in five years falling 0.9% led by food firms and automakers, while spending by non-manufacturers declined by 20.3% dragged by the leasing industry as a result of the change in accounting rules.

Companies’ total sales plunged 0.2% to 375.63 trillion yen falling for the third straight quarter. Also sales at manufacturers shed 1.5% weighed by sales of semiconductors, automobiles and electronic machineries.

However non-manufacturers'' sales rose 0.5% led by trading companies and marine transportation firms.

GM, Chrysler Consider Pre-Arranged Bankruptcy

General Motors Corp and Chrysler LLC may have to agree on pre-arranged bankruptcy to get a bailout from the government if it exhausts all options currently available.

Staff for three members of Congress has reportedly asked restructuring experts if a pre-arranged bankruptcy that is negotiated with workers, creditors and lenders can be used to restructure the industry without arranging for liquidation.

The U.S. three biggest automakers- General Motors, Chrysler LLC and Ford Motors- are seeking a $34 billion bailout in loans and credit lines to weather the deteriorating conditions. The $34 billion is not going to be sufficient to save these companies, most analysts believe that three companies may need more than $100 billion and will be back asking for money.

Yen Falls

The yen dropped 0.45% to 92.88 against the U.S dollar from 92.85 yesterday.

Gainers & Losers

Taiheiyo Cement led advancers in the Nikkei 225 index shares with a rise of 16.2% followed by increases in Sky Perfect JSAT of 11.5%, in Nippon Mining House of 11.3%, in Sumitomo Osaka of 10.3%, and Mitsubishi Paper of 9.1%.

Nippon Mining House rose on news that the business will merge with Nippon Oil Corp. with the resultant entity saving 60 billion yen every year within three years.

Mitsubishi Paper rose as crude oil price fell to $46.9 per barrel. OJI Paper advanced 6.4% and Hokuetsu Paper soared 3.8%.

Pioneer Corp. led decliners in the Nikkei 225 index shares with a fall of 12.7% followed by losses in Sanyo Electric of 12.4%, in Bridgestone Corp. of 9.2%, in Mitsui Fudosan of 8.4%, and Nikon Corp. of 8.2%.

Sanyo Electric slid as Goldman Sachs rejected Panasonic’s offer to buy Sanyo Electric Co. for 150 yen per share.

Nippon Oil and Nippon Mining to Integrate Businesses

Nippon Oil Corp. and Nippon Mining Holdings jointly announced today that they will merge their business in October next year. Analysts forecast that if successful the transaction will create the world’s eighth biggest company in sales.

The two companies will create a holdings company responsible for supervising the operating companies that will be established through the merged entity.

According to Nippon Oil president Shinji Nishio, the companies will save 60 billion yen every year within three years of the merger. In addition, the integrated company will lower crude refining capacity by 400,000 barrels per day within two years after the merger.