Japan’s Topix Index (TPX) plunged to the lowest level since 1983 and entered a bear market, after disappointing U.S. jobs and China services data added to evidence the global economy is slowing.
Toyota Motor Corp. (7203) dropped 3.5 percent after reporting lower-than-estimated U.S. sales. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, fell below 1,000 yen for the first time since 1980, when the company introduced its iconic Walkman in the U.S. Hitachi Construction Machinery Co. (6305), which depends on China for 17 percent of its sales, fell 3.9 percent after a report suggested growth in China is slowing. Nippon Yusen K.K. (9101) led shippers lower after a measure of cargo rates dropped.
The Topix slid 1.9 percent to 695.51 at the 3 p.m. close of trading in Tokyo, the lowest since Dec. 13, 1983 and below levels last seen since the global financial crisis following the 2008 collapse of Lehman Brothers Holdings Inc. About six stocks fell for each that rose on the measure. The Nikkei 225 Stock Average (NKY) dropped 1.7 percent to 8,295.63, erasing its gains for the year.
“This is a panic selloff,” said Koichi Kurose, chief economist at Resona Bank Ltd., Japan’s fifth-largest lender by market value. “Action from policy makers is the only thing that will calm the market. The market is pricing in a deterioration in the U.S. economy through summer.”
The Topix has fallen more than 20 percent since March 27 amid a deepening debt crisis in Europe and slowing growth in China. A decline of that size from the year’s peak signals the start of a bear market and compares with a 9.5 percent drop on the Standard & Poor’s 500 Index (SPX) and a 12 percent slide for the Stoxx Europe 600. (SXXP)
Topix Valuations Drop
The Topix declined for a ninth consecutive week as of June 1, the longest losing streak since 1975. The drop has cut the value of shares on the gauge to a record-low 0.82 times book value, according to data compiled by Bloomberg going back to 1993.
Brokerages, steelmakers and insurance companies were the worst performers among the Topix’s 33 industry groups since March 27. Renesas Electronics Corp. (6723) lost 54 percent, the worst performer on the gauge. The chipmaker was followed by Ulvac Inc. (6728), a maker of vacuum devices, which plunged 49 percent.
The Nikkei 225 Volatility Index (VNKY) rose 12 percent to 30.93, the highest since November, indicating traders expect a swing of about 9 percent on the benchmark gauge over the next 30 days.
Futures on the S&P 500 lost 0.6 percent today. The index slumped 2.5 percent in New York on June 1 after U.S. employers added fewer jobs than expected and the unemployment rate rose to 8.2 percent. A gauge tracking manufacturing fell to its lowest in 10 months.
The employment data “raised a question mark about the view that the U.S. economy is stabilizing,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of about $64 billion. “Expectations for further monetary easing in the U.S. may push down the dollar-yen exchange rate. These factors could be a double whammy for Japanese equities.”
Toyota and Honda Motor Co. led five of the six largest automakers in reporting U.S. sales that trailed estimates in May as slumping job growth limited a rebound from last year’s earthquake and tsunami. Toyota lost 3.5 percent to 2,904 yen, while Honda declined 3.7 percent to 2,368 yen.
Japanese exporters fell after the yen on June 1 touched the highest level against the dollar since Feb. 14, when the Bank of Japan surprised the market by setting an inflation target and expanding its asset-purchase program. Subsequent monetary easing has failed to weaken the yen and boost shares.
Finance Minister Jun Azumi today said Japanese equity prices do not reflect economic conditions, while Bank of Japan Governor Masaaki Shirakawa said the central bank is carefully watching how the yen’s advance has been affecting the nation.
Sony slumped 1.7 percent to 996 yen after falling to as low as 990 yen. Canon Inc. (7751), the world’s biggest camera maker, lost 5.2 percent to 2,893 yen.
China’s non-manufacturing industries fell to 55.2 in May from 56.1 in April, the slowest pace in more than a year, the government said yesterday, amid declining export orders and weakness in real estate. China’s purchasing managers’ index slid to 50.4 from 53.3 in April, the statistics bureau and logistics federation said June 1.
Companies that do business in China fell. Hitachi Construction Machinery fell 3.9 percent 1,392 yen. Trading company Emori & Co. (9963), which depends on China for 41 percent of its sales, dropped 1.2 percent to 902 yen.
Shipping lines slid after the Baltic Dry Index (BDIY), a measure of shipping costs for commodities, dropped 2.1 percent. Nippon Yusen, Japan’s biggest shipping line by sales, fell 3 percent to 193 yen. Mitsui O.S.K. Lines Ltd. (9104), ranked second in the sector, fell 5.3 percent to 249 yen.
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