Friday October 10, 08:00 AM
Nikkei posts biggest 1-day loss since 1987 crash
TOKYO, Oct 10 (Reuters) - Japan's Nikkei (news) stock average fell 9.6 percent on Friday for its biggest one-day percentage loss since the 1987 stock market crash on growing fear the financial crisis will spark a global recession.
The Nikkei, which has fallen for seven straight days, lost 24 percent on the week, more than twice what it lost the week of the 1987 stock market crash. It has lost 46 percent this year.
'This is panic. New York, the currencies -- there's nothing left for us to trust,' said Takashi Ushio, head of investment strategy at Marusan Securities.
'Investors are scurrying to convert to cash. A lack of confidence is coupling with panic.'
Sentiment already battered by a fall in New York shares and news that a Japanese real estate investment trust had failed grew worse after a bankruptcy filing by unlisted Yamato Life Insurance spooked the market.
The benchmark Nikkei sank 881.06 points to 8,276.43, its lowest close since May 2003. At one point it was down more than 1,000 points.
The broader Topix shed 7.1 percent to 840.86.
Market fears were fed by New City Residence Investment Corp's <8965.T> announcement on Thursday that it had filed for court protection from creditors, making it the first Japanese real estate investment trust to fail as fallout from the credit crunch spreads.
'The Nikkei has lost close to 20 percent in three days alone, and it's certainly not as if economic fundamentals have worsened that much in that time period,' said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
'It's basically all psychological. And it's not going to stop until fears about the financial system have been erased.'
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.
ACTION NEEDED NOW
'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,' said Yoshinori Nagano, chief strategist at Daiwa Asset Management.
But market participants said the market had lost the ability to move on expectations alone and that only concrete action, or firm promises and a clear timetable, would help. Investors were also warry of holding large positions ahead of a three-day weekend in Japan, with Monday a market holiday. 'This has become a bit of a jinx, especially since on the last Japanese three-day weekend in September, Lehman Brothers (NYSE: LEH - news) failed,' said Masayoshi Okamoto, head of dealing at Jujiya Securities.
Tech stocks were especially battered, with Kyocera Corp (Munich: 860614 - news) <6971.T> losing 13.3 percent to 5,660 yen and TDK Corp (Frankfurt: 857032 - news) down 13.1 percent at 3,320 yen, but selling also extended to defensive shares that had been popular even during recent falls. Fast Retailing lost 10.5 percent to 8.560 yen, becoming the biggest drag on the Nikkei 225, and Terumo Corp (Munich: 867003 - news) <4543.T> lost 11.6 percent to 3,820 yen.
Trade picked up on the Tokyo exchange's first section, with 3.27 billion shares changing hands, compared with last week's daily average of 2.08 billion.
Declining stocks outpaced advancing ones by more than 8 to 1.
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