Friday October 10, 04:10 AM
Nikkei dives 10.6 pct, eyes biggest fall since 1987
TOKYO, Oct 10 (Reuters) - The Nikkei average tumbled nearly 11 percent on Friday, leaving it facing its biggest one-day drop since the 1987 stock market crash on fears the financial crisis will lead to a global recession.
The early
stock sell-off led the Osaka Stock Exchange to trigger a circuit-breaker and briefly halt trade in Nikkei (news) futures.
A bankruptcy filing by unlisted Yamato Life Insurance shocked the market, given that Japan's financial institutions had appeared to be relatively resilient to the credit crisis tearing through the United States and Europe, analysts said.
'No one is buying. Fundamentals don't matter any more and there's no explanation for such a plunge,' said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
'Fears about the U.S. financial system have been rekindled. The U.S. government is still debating whether it would inject money into financial institutions. It needs to act now even if that would be beyond the current law.'
The U.S. Treasury Department plans to start directly injecting capital in U.S. banks as soon as the end of October in exchange for passive investment stakes, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.
'On top of a tumble in U.S. stocks, we have domestic credit fears today. The news about Yamato Life came as rather a surprise and that is fuelling more fear,' said Tsuyoshi Segawa, equity strategist at Shinko Securities.
New City Residence Investment Corp has also filed for court protection from creditors, the first Japanese real estate investment trust to fail as fallout from the credit crunch spreads.
The benchmark Nikkei sank 10.6 percent or 974.12 points to finish the morning session at 8,183.37. At one stage, it hit the lowest point since May 2003.
If it finishes at this level, it will surpass a 9.4 percent fall in the Nikkei earlier this week, which was the biggest fall since a 14.9 percent one-day slide during the 1987 stock market crash.
The broader Topix lost 8.3 percent to 829.91.
The Dow Jones industrial average dropped 7.3 percent to 8,579.19 on Thursday, with bank and insurance stocks hammered again, as the previous day's coordinated global interest-rate cuts and myriad other official measures to unfreeze money markets did little to boost confidence in the financial sector.
'Investors are scurrying to convert to cash. A lack of confidence is coupling with panic,' said Takashi Ushio, head of investment strategy division at Marusan Securities.
EXPORTERS BATTERED
Exporters took a heavy beating on the deteriorating economy overseas and a strong yen, which curbs their overseas profits when they are brought back home.
The dollar hit a six-month low of 98.50 yen as investors panicked about the sell-off in global stocks.
Electronics parts maker Kyocera Corp (Munich: 860614 - news) tumbled 13.3 percent to 5,660 yen, while Honda Motor Co (Stuttgart: 853226 - news) skidded 8.4 percent to 2,120 yen.
Financial shares sank, with top lender Mitsubishi UFJ Financial Group losing 8.5 percent to 710 yen.
Nomura Holdings (N33.SI - news) , Japan's biggest brokerage, declined 6.4 percent to 1,150 yen.
Shares of New City Residence Investment were untraded due to a glut of sell orders at 61,000 yen, down 14 percent from Thursday's close, after it said it had filed for court protection from creditors with $1.1 billion in debt.
The failure triggered selling of other REITs. The Tokyo REIT index was down 14.2 percent.
Trade picked up on the Tokyo exchange's first section, with 1.55 billion shares changing hands, compared with last week's morning average of 910 million.
Declining stocks outpaced advancing ones by more than 27 to 1.
(Reporting by Aiko Hayashi; Additional reporting by Elaine Lies; Editing by Sophie Hardach)
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
