Bloomberg News

Japanese Stocks Drop to Two-Year Low as Europe Delays Greece Aid

September 26, 2011

Sept. 26 (Bloomberg) -- Japanese stocks declined, with the benchmark Nikkei 225 Stock Average dropping to its lowest level in more than two years, as exporters and trading companies dropped on concern Europe won’t resolve its debt crisis.

Sony Corp., which depends on Europe for about a fifth of its sales, fell 4.1 percent. Mitsubishi Corp., Japan’s biggest commodities trader by sales, slumped 7.9 percent as copper futures extended declines. Nippon Electric Glass Co. tumbled 12 percent after the glassmaker cut its profit forecast for the first half.

The Nikkei 225 dropped 2.2 percent to 8,374.13 at the 3 p.m. close in Tokyo, its lowest since April 2009, as Japanese share prices caught up with declines late last week in the U.S. and Europe. Japanese markets were closed for a holiday on Sept. 23. The broader Topix index declined 2.1 percent today to 728.85.

“There’s concern that Europe’s debt crisis will spread to the financial system and we’ll see Lehman Crisis Part II,” said Takashi Hiroki, chief strategist at Monex Securities in Tokyo. “Stocks are falling as concern builds that the global economy is slowing. A sell-off in shares sensitive to the economy, such as commodity-related stocks, reflects investors’ fears.”

‘Catastrophic Risk’

Futures on the Standard & Poor’s 500 Index fell 1.2 percent today, erasing gains of as much as 1.3 percent after German Deputy Finance Minister Joerg Asmussen said euro-region finance ministers won’t be in a position to disburse the next installment of aid to Greece when they meet on Oct. 3.

U.S. Treasury Secretary Timothy F. Geithner warned at the annual meeting of the IMF in Washington on Sept. 24 that failure to combat the Greek-led turmoil threatened “cascading default, bank runs and catastrophic risk.”

“Uncertainty is controlling the minds of investors,” said Yoshihisa Okamoto, who helps oversee about $34 billion at Mizuho Asset Management Co. “There is no specific vision on how to deal with the likely default of Greece.”

Japanese exporters to Europe tumbled. Sony, the maker of Bravia televisions and PlayStation game consoles, sank 4.1 percent to 1,423 yen. Nissan Motor Co., which gets about 15 percent of sales from Europe, fell 3.6 percent to 620 yen.

The Nikkei 225 has fallen 23 percent from its 2011 high on Feb. 21 as a record earthquake in March, slowing U.S. economic growth and Europe’s debt crisis threatened the nation’s recovery. Stocks on the gauge are trading at 13.5 times estimated earnings, compared with 11.4 times for the Standard & Poor’s 500 Index.

No New Policies

Japanese stocks may continue to fall amid concern the Group of 20 nations isn’t doing enough to tackle Europe’s debt crisis, said Manabu Tamaru, senior investment manager at Baring Asset Management in Tokyo.

G-20 finance chiefs issued an unscheduled communiqué on Sept. 23 that stopped short of announcing fresh policies while saying policy makers are “committed” to taking joint action to address “renewed challenges” to the global economy.

Raw-material suppliers dropped after a gauge of metal prices in London slumped 13 percent last week, the most since December 2008. Copper futures in London plunged as much as 7.2 percent today, extending declines for a seventh consecutive day.

Mitsubishi Corp. slumped 7.9 percent to 1,565 yen. Mitsui & Co., which gets about 40 percent from trading energy and metals, slid 5.9 percent to 1,172 yen.

Tokyo Electric

Nippon Electric tumbled 12 percent to 656 yen. The company lowered its net-income forecast for the six months through September to 24 billion yen ($313 million) from a range of 26.5 billion yen to 29.5 billion yen due to weaker demand for flat- panel displays.

Tokyo Electric Power Co., the utility at the center of the worst nuclear crisis in 25 years, slumped 13 percent to 259 yen, the steepest decline on the Nikkei. The utility will have to cut jobs and carry out other reforms before increasing electricity rates to raise money to compensate people affected by the Fukushima disaster, said Takehiko Sugiyama, head of the government body set up to help disaster victims.

Separately, the Asahi newspaper reported that raising power rates by 10 percent wouldn’t be enough to cover a short- fall in capital after paying damages.

--With assistance from Masaaki Iwamoto in Tokyo. Editors: Jason Clenfield, John McCluskey.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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