Jittery investors dump stocks amid nuclear fears in Japan

PUBLISHED : Wednesday, 16 March, 2011, 12:00am
UPDATED : Wednesday, 16 March, 2011, 12:00am

Fears over the safety of Japanese nuclear reactors sent shockwaves through Asian markets yesterday after Prime Minister Naoto Kan warned of increasing risk of further radiation leaks following a blast at a nuclear power plant in Fukushima.

The Nikkei-225 Index tumbled to its worst two-day loss since 2008, sending a ripple through Asia's equity markets. At one point, the Nikkei was off almost 14.5 per cent before clawing back some lost ground.

Japan's benchmark Nikkei ended down 10.6 per cent at 8,605.15 points as jittery investors dumped Japanese equities, especially those from the insurance and manufacturing sectors.

Taiwan lost 3.35 per cent, South Korea shed 2.4 per cent and Australia fell 2.11 per cent.

The mainland's two stock markets also went into reverse: Shanghai declined 1.41 per cent and Shenzhen fell 1.33 per cent.

The sell-off also hit the Hong Kong market yesterday, with the benchmark Hang Seng Index plunging 667.6 points, or 2.86 per cent, to close at 22,678.25 points.

Europe's equity markets slipped into the red in early trading. The FTSE-100 was down 2.16 per cent in London, the CAC 40 in Paris was off 3.40 per cent and the DAX in Frankfurt was off 3.96 per cent. In early trade, the Dow Jones Industrial Average was down 2.02 per cent.

Tokyo Electric Power Co (Tepco), which owns the nuclear reactor at Fukushima, has been hit by selling since Monday and lost 24.68 per cent yesterday. On Monday, its share price fell 23.57 per cent.

Major corporates were also punished: Toyota Motor, the world's biggest carmaker, lost 7.40 per cent. Mazda, seen as more exposed because of its reliance on Japanese factories, was harder hit and lost 13.81 per cent, and electronics giant Sony lost 8.86 per cent.

Oil fell in New York last night on fears damage to Japanese factories will choke demand, Bloomberg reported. Brent oil for April settlement fell 1.9 per cent to US$111.49 a barrel.

Shogo Maeda, head of Japanese equities at Schroders, estimated that the region hardest hit by the earthquake and tsunami accounted for about 7 per cent of the country's gross domestic product.

Investment manager BlackRock expects sharp falls in industrial output in Japan and predicts that the economy may contract in the second quarter.

Analysts said the Japanese central bank's 15 trillion yen (HK$1.43 trillion) injection would provide liquidity and stability to financial markets, and could also discourage repatriation of money by Japanese companies.

Analysts said aftershocks from the quake - which are hurting sentiment and Hong Kong's stock market - would stay volatile.

Ben Kwong Man-bun, chief operating officer of securities firm KGI Asia, predicted that the Hang Seng Index would likely trade between 22,000 and 24,000 points, adding that mainland stocks could be a safe haven because they are less susceptible to changes in Japan's economy. Earlier this year, China officially overtook Japan as the world's second-largest economy after the US.

Banny Lam, an economist with CCB International Securities, said the quake in Japan, one of the world's leading suppliers of electronic parts, could have both a negative and positive impact on China's economy. It may be a setback for some mainland firms because of the supply chain disruption. But it could also be an opportunity for high-end IT firms and carmakers to boost market share.