Bloomberg News

Japan’s Topix Falls to Four-Month Low on European Risks

May 15, 2012

May 15 (Bloomberg) -- Japanese stocks fell, with the Topix Index dropping to a four-month low, as continuing political gridlock in Greece added to speculation the nation will leave the euro and the ratings of 26 Italian banks were cut by Moody’s Investors Service, damping demand for riskier assets.

Nippon Sheet Glass Co. (5202), which gets 39 percent of its sales in Europe, slumped 3.1 percent to its lowest level on record. Kawasaki Kisen Kaisha Ltd. (9107) led shipping companies lower after a gauge of cargo rates slid. Hokuetsu Kishu Paper Co. dropped 5.8 percent after forecasting a decline in profit.

The Topix lost 1.2 percent to 747.40 as of 3 p.m. in Tokyo, the lowest close since Jan. 19. More than three shares fell for each that rose on the measure. The Nikkei 225 Stock Average (NKY) dropped 0.8 percent to 8,900.74, with trading volume 14 percent above the 30-day average.

“The market is moving in anticipation of the worst-case scenario because we don’t know what will happen” in Greece, said Shintaro Takeuchi, portfolio investment group manager at Tokio Marine & Nichido Fire Insurance Co. that manages $109 billion in assets. “The Greek turmoil has yet to dent economic fundamentals, but sentiment is causing a sell-off, particularly in Japanese equities.”

The Nikkei 225 has retreated 13 percent from this year’s high on March 27 as China’s economic growth slowed and on renewed concern about Europe’s debt crisis. The political leadership vacuum in Greece after an inconclusive election has stoked concern European officials will give up on the nation.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.5 percent today. The gauge fell 1.1 percent in New York yesterday after Greece’s struggle to form a unity government entered its second week. German Finance Minister Wolfgang Schaeuble said Europe has done its “utmost” to rescue the financially stricken country, limiting further room for leniency after about 240 billion euros ($308 billion) of aid pledges.

Italian Banks Downgraded

UniCredit SpA and Intesa Sanpaolo SpA were among 26 Italian banks whose credit ratings were cut by Moody’s, which cited weakened earnings and the country’s economic outlook.

Europe’s economy is expected to shrink 0.2 percent in the three months ended in March from a year earlier, according to the median estimate of 25 economists surveyed by Bloomberg ahead of today’s report. That would be the first contraction since the last quarter of 2009.

“Investors would think if Greece goes, maybe Portugal, Spain and Italy go,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “I think we may go through a period of fairly intense uncertainty if they end up leaving.”

Exporters Retreat

Exporters to Europe fell. Nippon Sheet Glass declined 3.1 percent to a record-low 93 yen after saying it will halt a furnace at its German plant on slumping demand. Nintendo Co., a maker of gaming consoles that gets 41 percent of its revenue in Europe, lost 3.1 percent to 9,470 yen.

Shipping lines fell after the Baltic Dry Index (BDIY), a measure of cargo rates for commodities, capped a four-day slide with a 0.5 percent decline yesterday. Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping company, declined 5.1 percent to 130 yen. Sector leader Nippon Yusen K.K. (9101) slid 2.5 percent to 197 yen.

Hokuetsu Kishu Paper fell 5.8 percent to 437 yen after it said net income will fall 41 percent to 7.5 billion yen ($94 million) in the year ending March 31, citing expectations for a strong yen, high oil prices and power shortages.

Stocks on the Topix are valued at 0.89 times book value, compared with 2.12 for the S&P 500 and 1.36 for the Stoxx Europe 600 Index. A value less than one means investors can buy companies for less than the value of their assets.

The Nikkei 225 Volatility Index (VNKY) added 1 percent to 22.11, indicating traders expect a swing of 6.3 percent on the benchmark gauge over the next 30 days.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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