Yen Ascent Continues

123jump.com Staff
27 Nov, 2009
New York City

Stocks in Tokyo closed lower after world markets declined and banks closed lower. The yen strengthened against the dollar and touched to a 14-year intra-day high. Exporters, shippers and trading companies closed lower.

[R]8:00 AM New York – Stocks in Tokyo closed lower after world markets declined and banks closed lower. The yen strengthened against the dollar and touched to a 14-year intra-day high. Exporters, shippers and trading companies closed lower.[/R]

World market indexes and banks around the world declined as lenders focus on analyzing their exposure to Dubai loans. However, analysts downplay of any sovereign debt default but do expect sizable loan losses at UK and European banks.

The Nikkei 225 Index in Tokyo closed lower 301.72 or 3.22% to 9,081.52.

The yen continued its ascent against the dollar and the euro and domestic investors sought the safety. The yen closed at 86.53 against a dollar but in Tokyo on Friday traded as high as 84.83, a 14-year record.

Finance Minister Horihisa Fujii stated that he will contact regulators and leaders of the U.S. and European nations, but market watchers construed the talk as political rhetoric. However, investors did not rule out the possibility of central bank intervention in the currency market.

In trading exporters declined on the worries that strengthening yen will hurt the profitability of automakers and electronics exporters.

Dubai Worries

Investors in Europe and Middle East were unnerved after Dubai World sought debt rescheduling for debt totaling at least $10 billion. The lack of loan details and the extent of exposure at different banks dragged banks lower in Europe and Middle East.

Royal Bank of Scotland said that French banks have loans $11.3 billion and German banks have loaned $10.2 billion. Swiss banks have loaned $4.3 billion and Italian banks have lent $1.9 billion to the emirates. The data reflect direct lending at the end of June and does not capture the bonds issued and securitized by banks.

According to the data available from Bank of International Settlements and Emirates Banks Association said that HSBC had the highest loan exposure to UAE that may be as high as $11 billion followed by Standard Chartered Bank with $7.8 billion.

Japanese banks have an exposure of $9 billion to UAE linked loans. The data do not include the bonds and other securitized products.

While analysts are downplaying the fears of sovereign default, the lack of reliable data in the region are making investors jittery.

Thomson Reuters data suggest that syndicated loans that are still not repaid by Dubai stand at $45 billion of which $39 billion are issued to companies controlled by state or government owned companies.

Nikkei 200 Average Movers

Kajima Corporation led the decliners in the Nikkei 225 index of 14.2% followed by losses in Obayashi Corporation of 8.6%, Pioneer Corporation of 7.9%, in Clarion Co., Ltd. of 7.5% and in Toho Zinc Co., Ltd. of 7.1%.

Mitsui Sumitomo Insurance Group Holdings, Inc. led gainers in the Nikkei 225 index with a rise of 1.1% followed by gains Chubu Electric Power Company, Incorporated of 0.9%, in Nippon Paper Group, Inc of 0.8%, in The Tokyo Electric Power Company, Incorporated of 0.8%, and in Ajinomoto Co., Inc. of 0.7%.

Tokyo Movers

Casio Computer declined 5.6% to 609 yen and Citizen Holding dropped 3.2% to 466 yen.

Construction equipment makers declined after Dubai loans worries stoked speculation that construction equipment sales in the Middle East may take a hit.

Hitachi Construction Machinery Ltd declined 7.1% to 1,927 yen, IHI Corp fell 7% to 131 yen and Kubota Corp fell 5.7%.

Falling commodities priced led trading companies lower. Marubeni Corp fell 6% to 434 yen and Mitsui & Company dropped 5.4% to 1,105 yen.

Automakers closed lower on the strengthening yen worries. Honda Motor declined 3.8% to 2,660 yen and Hino Motors Ltd fell 2.1% to 233 yen. Toyota Motor decreased 2.3% to 3,300 yen.

Sony Corp declined 4.4% to 2,265 yen and Panasonic Corp fell 3.7% to 1,067 yen.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 301.72 or 3.22% to 9,081.52, and Hang Seng index in Hong Kong decreased 1,075.91 or 4.84% to 21,134.50, and CSI 300 index in China lower 103.26 or 2.96% to 3,382.51. ASX 200 index in Australia decreased 136.50 or 2.90% to 4,572.10. Markets in Malaysia were closed today.

The Kospi Index in South Korea decreased 75.02 or 4.69% to close at 1,524.50. SET index in Thailand closed lower 5.36 or 0.78% to 680.37. The Sensex index in India decreased 222.92 or 1.32% to 16,632.01. The markets in Indonesia were closed today.