Bloomberg News

Japan Stocks Poised for Longest Loss Streak Since 2001

May 18, 2012

Mizuho Financial Group Inc., Japan’s third-largest bank by market value, paced losses among banks, dropping 2.5 percent. Photographer: Kiyoshi Ota/Bloomberg

Mizuho Financial Group Inc., Japan’s third-largest bank by market value, paced losses among banks, dropping 2.5 percent. Photographer: Kiyoshi Ota/Bloomberg

Japanese stocks fell, with the Topix Index capping the longest streak of weekly losses since the Sept. 11 attacks in 2001, as exporters declined after U.S. economic data missed estimates and a rating cut of Spanish banks fueled concern Europe’s debt crisis is deepening.

Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics that depends on Europe and the U.S. for 38 percent of its sales, fell 5.3 percent. Hitachi Construction Machinery Co. (6305) led machinery makers lower after industry bellwether Caterpillar Inc. said its sales growth slowed. Mizuho Financial Group Inc. (8411), Japan’s third-largest bank by market value, paced losses among lenders, dropping 3.4 percent after Moody’s Investors Service downgraded 16 Spanish banks.

The Topix index fell 2.9 percent to 725.54 as of the 3 p.m. trading close in Tokyo, capping its biggest daily loss since Aug. 5. The measure fell 4.3 percent this week, its seventh week of decline. It has dropped for seven straight weeks only twice since November 1977 -- in 2001 and 1995. About eight stocks fell for each that rose.

“Shares are under heavy sell-off pressure across the board amid pessimism about earnings,” said Kazuyuki Terao, chief investment officer of RCM Japan Co. “Yesterday’s news out of the U.S. countered the view the economy is doing OK and dimmed the outlook, taking away yet another supporting factor for the market.”

Year’s Biggest Drop

The Nikkei 225 Stock Average (NKY) lost 3 percent to 8,611.31, the biggest one-day drop since Aug. 5. The gauge is down 3.8 percent on the week. Trading volume was 21 percent above the 30- day average. The Nikkei 225 Volatility Index (VNKY) added 25 percent to 28.56, the highest since November 2011, indicating traders expect a swing of 8.2 percent on the benchmark gauge over the next 30 days.

The Topix Index retreated 17 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 gridlock after an inconclusive election last week reignited fears Greece will renege on austerity pledges required for 240 billion euros ($304 billion) in aid and exit the euro.

Stocks on the Topix are valued at 0.86 times book value, compared with 2.06 for the Standard & Poor’s 500 and 1.33 for the Stoxx Europe 600. A value of less than one means investors can buy companies for less than the value of their assets.

BOJ Response

Falling shares add pressure on the Bank of Japan to deploy further monetary stimulus to help the nation’s economy recover from last year’s natural and nuclear disasters. The central bank, which expanded its asset purchase program twice this year as well as setting an inflation goal of 1 percent, is scheduled to wrap up its policy meeting on May 23.

“While BOJ officials are probably thinking they’ve done their part after loosening policy in April, the market may disagree,” said Terao at RCM, which oversees about $138 billion globally, according to its website. “The BOJ’s action didn’t make much of an impact as the global market downturn weighed on the economic outlook. I don’t expect them to move this time.”

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today. The index dropped 1.5 percent to a four-month low in New York yesterday, when reports showed U.S. jobless claims were unchanged at 370,000 last week and the Bloomberg Consumer Comfort Index fell in the week ended May 13 to minus 43.6, a level associated with recessions or their aftermaths.

Makers of electronics and cars accounted for about a third of the Topix’s decline today. Sony fell 5.3 percent to 1,100 yen, and Asia’s biggest carmaker Toyota Motor Corp. (7203) dropped 3.7 percent to 3,030 yen.

Spanish Banks

Shares also fell as Banco Santander SA (SAN) was among 16 Spanish banks whose credit ratings were cut by Moody’s, which cited economic weakness and the government’s mounting budget strain. Greece’s credit rating was downgraded one level by Fitch Ratings on concerns the country won’t be able to muster the political support needed to sustain its membership in the euro area.

Banks fell. Mizuho Financial Group declined 3.4 percent to 115 yen. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, slid 3.4 percent to 339 yen.

Machinery makers dropped after Caterpillar said global machinery retail sales rose 12 percent in the three months through April, down from an 18 percent rise in the quarter through March. Hitachi Construction slumped 9.6 percent to 1,487 yen. Komatsu Ltd. (6301), Japan’s largest construction machinery maker, dropped 5.7 percent to 1,879 yen.

Stocks fell even after the 25-day Toraku index, which compares advancing and declining shares on the Tokyo Stock Exchange, had fallen below 70, a level some traders take to signal that shares have dropped too far. The time may not be right for a turnaround, said Yutaka Miura of Mizuho Securities, a unit of Japan’s second-biggest bank by assets.

“The Nikkei may have further to fall as investors are becoming more risk-off amid revived concern over Greece and Europe,” Miura said. “In recent years, the Toraku buy signal has shifted toward 60 from 70 in some cases so there could be more room to fall.”

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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