Japan's stocks end year with biggest loss on record

Just three main indices set to end 2008 in the black

The Japanese stock market has ended 2008 nursing the biggest loss in its 58-year history.

The Nikkei 225 average, a price-weighted average of Japan's blue chips, slumped by a record 42 per cent over the last 12 months, eclipsing the 39 per cent loss recorded in 1990. The final session on Wednesday saw the index firm by 1.3 per cent, offering scant consolation to investors in the world's second largest economy.

The market, which is due to reopen for business next week, suffered as the demand for Japanese products buckled under the pressure of the global recession and a soaring yen.

Local market participants forecast a tough 2009 for the Japanese bourse, although there is some hope that government stimulus packages might mitigate the impact of the economic slowdown. "Everyone's pinning their hopes on economic stimulus policies by the United States and possibly China," said Tomomi Yamashita, a fund manager at Japan's Shinkin Asset Management.

Yutaka Miura, a senior technical analyst at Shinko Securities, sees some scope for a rebound in the market, but expects the heavily weighted automobile sector to remain on the back foot. "Things will remain tough for the auto sector next year, although with much of the bad news already factored in, a bit of a rebound is not entirely impossible," he said.

The UK's FTSE 100, which will end the year with a reduced session today, has so far fared better, losing around 32 per cent in the year to date. America's Dow Jones Industrial Average is down by more than 35 per cent.

Despite their losses, Japanese investors fared better than their counterparts in Iceland. The OMX Iceland 15 index has plunged 94.4 per cent, a testament to the economic and financial storm that engulfed the island nation in 2008. Iceland's three biggest banks – Kaupthing, Landsbanki and Glitner – had to be nationalised as the government in Reykjavik tried to limit the crisis.

On the upside, the resource-heavy Ghana Stock Exchange, was the strongest. The bourse, which does not have electronic trading, left everywhere else in its wake with gains of more than 60 per cent over the last 12 months. Much of the stability in Ghana is down to the lack of liquidity, with the number of shares changing hands falling to the tens of thousands in some sessions, compared with the hundreds of millions of shares that are traded on the world's leading indices. The exchange is dominated by local subsidiaries of international mining, oil, brewing and financial services companies.

Only two other main exchanges are in the black so far this year. Tunisia's Tunindex has been boosted by its liberalisaion programme and the privatisation of state enterprises. And in Latin America, Ecuador's Guayaquil stock exchange bucked the downward trend despite the country's recent sovereign debt default.