Bloomberg News

Japan Stocks Fall Amid Europe Concern; Topix Revisits 2009 Lows

November 16, 2011

Nov. 16 (Bloomberg) -- Japanese stocks fell, with the Topix Index closing at its lowest since March 2009, after the Bank of Japan cut its assessment of the economy and amid concern Italy’s new government will struggle to secure enough support to ease Europe’s debt crisis.

Honda Motor Co., Japan’s second-biggest carmaker by market value, slid 2.2 percent. Asahi Glass Co., which depends on Europe for about a fifth of its sales, dropped 5.5 percent. Elpida Memory Inc. surged 8.8 percent after tumbling yesterday to its lowest level since 2008 amid speculation the memory-chip maker would be removed from MSCI’s indexes. Olympus Corp. surged by its daily limit for the third day amid growing confidence the scandal-hit company will avoid being delisted.

The Nikkei 225 Stock Average fell 0.9 percent to 8,463.16. The broader Topix Index retreated 0.9 percent to 724.11. More than four stocks declined for each that rose, as the total value of members’ shares fell to the lowest level since March 19, 2009.

“It’s hard for investors to buy risky assets amid worries about the impact of Europe’s debt crisis on the global economy,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $20 billion. “The earnings outlook for exporters is unclear. There are too many uncertainties for investors to be proactive.”

The Bank of Japan downgraded its outlook on the economy as a global slowdown and Europe’s debt crisis put exports at risk. The central bank held the overnight-lending rate near zero and left its asset-buying fund unchanged at 20 trillion yen ($260 billion).

Topix Slide

The Topix index sank 19 percent this year amid concern Europe’s crisis and the March 11 earthquake would slow Japan’s export-led recovery. The decline has cut the price of shares on the index to 0.9 times estimated book value, compared with 1.08 times at the start of the year.

Honda slid 2.2 percent to 2,224 yen. Nissan Motor Co., an automaker which depends on Europe for 15 percent of its sales, slumped 2.4 percent to 694 yen. Asahi Glass sank 5.5 percent to 606 yen.

Stocks fell after yields on Italy’s 10-year bonds rose again above the 7 percent threshold that prompted Greece, Ireland and Portugal to seek bailouts. Italy’s prime minister- designate Mario Monti will announce his new government today as he strives to convince investors he can trim Europe’s second- biggest debt.

“Italy is not terminal yet, but it will need evidence of concrete steps toward reform,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “The market will create risk-on and risk-off until evidence emerges one way or another.”

MSCI Reshuffle

Sanrio Co., the maker of Hello Kitty products, slid 0.7 percent to 4,060 yen. The shares earlier rose as much as 2.4 percent after MSCI Inc. said the stock will be added to its Japan index. Bearing-maker Minebea Co. dropped 2 percent to 298 yen and Mitsui Engineering & Shipbuilding Co. slid 3.4 percent to 114 yen after MSCI said it would remove the stocks.

The index compiler said changes would take effect at the Nov. 30 close. Inclusion means stocks on the gauge are more likely to be bought by investors who track index performance.

Elpida surged 8.8 percent, the most in nearly two months, to 359 yen after MSCI kept the company listed. The stock tumbled yesterday amid speculation it would be removed after it lost more than two-thirds of its market value this year as prices for DRAM slid to record lows. The stock also rose after Elpida announced it may cut production to bolster prices.

Olympus surged 16 percent to 740 yen, extending its biggest two-day gain in at least 37 years, after a Nov. 13 Reuters report that the company may remain listed on the Tokyo Stock Exchange. Japan’s securities regulator may recommend it pay a levy instead of being removed for making false financial statements.

--With assistance from Yoshiaki Nohara in Tokyo. Editors: Jason Clenfield, Jim Powell.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

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


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