Japan stocks fall
Japanese stocks fell on Thursday and domestic investors said they were poised to keep selling on rising yen volatility and a nuclear power plant crisis. Foreign buyers, drawn to valuations a cheap as Lebanon’s, steadied the market after an early tumble.
The benchmark Nikkei average ended 1.4 percent lower at 8,962.67 points .N225, recovering from the intraday low of 8,639.56. The yen dominated the session.
The Japanese currency slid after surging past a record peak against the dollar in white-knuckle trading that could have been linked to a stock market slump after an earthquake and tsunami hit Japan on Friday, damaging a nuclear power plant in Fukushima, north of Tokyo.
The rebound in dollar/yen helped short-covering in the stock market, said Yutaka Miura, senior technical analyst at Mizuho Securities.
Construction-related stocks, expected to benefit from rebuilding efforts, were among the biggest gainers. Elsewhere funds were unsure how to take positions for the longer term.
“I can’t take part in a market like this,” said the manager of a medium-size fund who normally invests in hi-tech and semiconductor shares.
“The risk you would have to take outweigh profits you can make in such a volatile market. Staying on the sidelines is the only sensible solution,” he said, asking not to be identified because he was not authorized to speak to the media.
The overnight surge in dollar/yen, past peaks set in the aftermath of the Kobe earthquake 16 years ago, added another element of risk to the picture.
Hammered by a Nikkei selloff on Monday and Tuesday, foreign banks have scrambling to raise cash in yen to cover their leveraged equity purchases, traders said. Japanese banks have been reluctant to lend after the earthquake, worried about rapid cash withdrawals.
That forced foreign institutions to use the forwards and swaps markets to procure cash, contributing to the spike in the yen.
The yen surged as far as 76.25 per dollar, raising the prospect of Japanese intervention to stall the rally. As the dollar recovered to around 79 yen, the Nkkei index also rebounded from a loss of more than 4 percent.
The Group of Seven rich nations will hold a conference call to help Japan later on Thursday, a G7 source told Reuters. Japan Economics Minister Kaoru Yosano told Reuters that market instability was not great enough to warrant coordinate currency intervention.
TEPCO TRADES
Tokyo Electric Power Co (9501.T), the operator of the stricken nuclear plant leaking radioactive material , plunged 62 percent from its last traded price on Friday. It was the most actively traded share on the Tokyo Stock Exchange’s first section.
Nikkei futures listed in Osaka were down 0.8 percent to 8,930, trimming some losses after falling as far as 8,400 at the start of trade.
With the market regaining its footing, investors were picking up construction-related stocks. Contractor Kajima Corp was up 2.6 percent (1812.T) to 236 yen and Taiheyo Cement Corp also rose 2.6 percent to 118 yen (5233.T).
“We’re seeing at least 50 billion yen orders from U.S. pension funds,” said a trader at a Japanese financial institution.
The broader TOPIX was down 0.8 percent to 810.80 after briefly rising to positive territory .TOPX.
Trading volume fell to 4.1 billion shares, the lowest so far this week. Tuesday’s volume was a record 5.8 billion shares.
Japanese stocks were trading at 0.9 times their book value, the same valuation as Greece, Lithuania, Slovenia and Lebanon, according to Thomson Reuters Starmine. The Tokyo Stock Exchange had the third largest market cap in the world last year.
With fears reaching fever pitch about the radiation leak in Fukushima and more governments warning their citizens about the dangers, the cost of insuring against Japanese government debt against default through credit default swaps has been rising and is now roughly equivalent to that of South Korea.
Five-year CDS on Japan was quoted at 115 basis points on Thursday, widening a few basis points.
Ten-year Japanese government bond futures finished the regular session down 0.02 point to 139.70, giving up initial gains. The cash 10-year JGB yield slipped 2 basis points to 1.200 percent, still higher than Tuesday’s low of 1.145 percent.
The Bank of Japan offered on Thursday to inject a further 5 trillion yen ($61 billion) into the banking system, trying to calm markets in the wake of the yen’s spike to a record high against the dollar.
Source: Reuters