Tokyo market: Asian slump spells gloom
JAPAN'S benchmark stock index may fall below 15,000 this week as gloom deepens over signs that Asia's economic slump is dragging down the rest of the world. Shares in exporters such as Sony and Honda are expected to lead the way down as investors fret taht a global slowdown will stunt profit growth.
"If things keep getting worse in Asia, emerging markets like Latin America are going to take a beating, and the US will certainly feel their pain," said Yukuo Kobayashi, a manager at Universal Investment Trust Management. "Optimists are few and far between in this market." The benchmark Nikkei 225 stock index last week fell 705.24 points, or 4.4 per cent, to 15,123.93. The Nikkei has closed down nine out of the last 10 sessions.
Japanese bonds are likely to be little changed as investors are split over whether the grim economic outlook will renew concern they will sell yen securities. The government's slow move to revive the economy "should be bad for stocks and prompt a flight to quality", said Michiya Seki, a manager at New Japan Securities. "But a fall in stocks may fuel concern about Japan's credibility."
Some time last week, slumping yen and stocks sparked the "Sell Japan" concern, boosting the yields on short-term interest rates and weighing on bonds. The yield on the benchmark government bond fell 2 basis points to 1.175 per cent.
Bank of Tokyo-Mitsubishi may pace declines by financial shares on worries falling currencies and share prices around Asia will make it harder for regional borrowers to repay the $133.5bn they owe Japan's 19 largest lenders.
Hong Kong's benchmark stock index sank last week to depths untested since 1993 on speculation the yen's chronic weakness might become the catalyst for competitive currency devaluations.
"Asia has become synonymous with country risk," said Hitoshi Yajima, director of Tachibana Investment Management.
Also weighing on market sentiment are concerns that financially troubled Long-Term Credit Bank's planned merger with Sumitomo Trust won't go through. Investors say a breakdown of talks would erode confidence in the government's ability to manage the restructuring of the industry.
"The merger is seen as a test case in the government's response to the whole banking crisis," said Mr Kobayashi. "LTCB's share price shows the market is giving a vote of no-confidence."
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