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Friday July 27, 3:51 PM2ND LD: Nikkei plummets to 3-month low on Wall St. plunge, stronger yen(Kyodo) _ (EDS: ADDING INFO IN 2ND, 9TH AND 14TH GRAFS)Tokyo stocks plummeted Friday on selling spurred by an overnight plunge in U.S. shares and the yen's sharp appreciation against other major currencies, dragging down the benchmark Nikkei to a nearly three-month low. The 225-issue Nikkei Stock Average lost 418.28 points, or 2.36 percent, to 17,283.81, its lowest finish since May 1. Its fall widened to a little over 500 points, or nearly 3 percent, at one point in the afternoon. The broader Topix index of all First Section issues on the Tokyo Stock Exchange lost 37.47 points, or 2.16 percent, to 1,699.71, closing below the 1,700 line for the first time since May 18. A broad range of Tokyo shares took a battering in the wake of Thursday's plunge in U.S. shares attributed to spreading jitters about the U.S. subprime-mortgage market. The Dow Jones Industrial Average of 30 blue-chip issues on the New York market lost 311.50 points, or 2.26 percent, to finish at 13,473.57, its second-biggest point loss for the year. Brokers said concerns grew that the deterioration in the U.S. subprime lending sector may spill over and slow the U.S. economy as a whole, a key market for Japanese products. Moreover, such credit worries led to a fall in the value of the dollar against the yen, a factor that eats into Japanese exporters' earnings. "There were prevailing concerns similar to what we had when global stocks plunged in March," when relentless selling hit shares in many countries in the wake of Shanghai stocks' tumble, said Kazuhiro Takahashi, head of the equity planning and administration department at Daiwa Securities SMBC Co. "Investors' risk tolerance diminished worldwide," Takahashi said, referring to currency traders' unwinding of yen-carry trades that pushed the dollar down to a three-month low at the 118 yen level, as well as stock declines in many countries overnight. In carry trade, investors borrow low-yielding currencies such as the yen and convert them into dollars and other high-yielding currencies for higher returns. The yen's appreciation encouraged investors to unload high-tech and other export-oriented issues, including blue-chips with positive earnings news such as Canon. Canon declined 380 yen to 6,510 yen despite the previous day's announcement of an all-time high group net profit in the January-June period. Toshiba, Sharp and Matsushita Electric Industrial all fell by in excess of 3 percent. Meanwhile, Sony recouped its early loss to finish higher, gaining 70 yen to 6,420 yen, following its announcement Thursday that its group net profit for the April-June quarter more than doubled from a year before. Also contributing to the Tokyo market's third consecutive day of decline were uncertainties over the House of Councillors election in Japan on Sunday, brokers said. Many investors were awaiting the outcome of the upper house election as recent media polls suggest Prime Minister Shinzo Abe's ruling coalition may suffer a major setback, raising market fears of possible political instability. "With the upcoming election, even people wanting to buy on dips retreated," said Tsuyoshi Segawa, equity strategist at Shinko Securities Co. In addition to high-techs, other major decliners included oil, mining, insurance and steel issues. Nippon Steel was the day's most heavily traded issue by both volume and value, dipping 20 yen to 884 yen. Japan's leading flour miller Nisshin Seifun Group dropped 18 yen to 1,131 yen following its announcement the previous day of disappointing earnings results for the April-June quarter on high raw material costs. Trading volume on the main section totaled 2,505.05 million shares, against Thursday's 2,011.68 million shares. The TSE's Second Section index lost 51.98 points, or 1.25 percent, to 4,110.76 on a volume of 61.55 million shares. On the Osaka Securities Exchange, the near-term September Nikkei 225 index futures contract went down 410 points to 17,290. |
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