Nikkei posts biggest drop since mid-2013 as global growth fears hit banks

Japan’s benchmark stock index has slumped 15 per cent this year

PUBLISHED : Tuesday, 09 February, 2016, 5:16pm
UPDATED : Tuesday, 09 February, 2016, 5:32pm

Japan’s Nikkei share average posted its biggest daily drop in nearly three years on Tuesday, with banks taking the brunt of the sell-off, while a stronger yen dragged down stocks across the board.

The Nikkei ended 5.4 per cent lower at 16,085.44 points, its lowest closing level since January 21 and its heftiest percentage drop since mid-2013.

European banks led a global sell-off in financial stocks on Monday as signs of stress in the sector mounted, triggering sharp selling in the beaten-down Japanese banking sector.

Mitsubishi UFJ Financial sank 8.7 per cent and Sumitomo Mitsui Financial dropped 9.0 per cent. Japanese banks have been under pressure from the Bank of Japan’s negative interest rate policy, introduced last month.

“The market is starting to digest that further and starting to relook at the potential implications not just for financials but for the broader economy, and the fact that the BOJ is running out of policy measures is one thing,” said Kei Okamura, assistant investment manager at Aberdeen Investment Management.

Concerns about Japan Inc’s earnings will likely persist this year
Yoshinori Shigemi, JPMorgan Asset Management

The Nikkei has slumped 15 per cent this year, hit by worries about a slowdown in China’s growth and sliding crude oil prices. The BOJ’s policy action and dismal Japanese corporate earnings have stoked fears among investors.

“I think this sort of succession of events is feeding through to pessimism in the market,” Okamura said.

The broader Topix stumbled 5.5 per cent to 1,304.33, after hitting an intraday low of 1,299.53, the lowest level since October 2014. All of its 33 subsectors were in negative territory.

Trading was active, with 3.17 billion shares changing hands, compared to an daily average of 2.3 billion shares. Daily turnover was 3.1 trillion yen, compared to an average of 2.5 trillion yen.

A slide in US stocks also spooked the market as uncertainty over whether the US Federal Reserve would raise rates this year triggered selling in the US dollar.

“Investors are increasingly worried about the US economy, and they are worried that a strong yen will eat into Japanese exporters’ earnings,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management. “Concerns about Japan Inc’s earnings will likely persist this year.”

During Asian trade, the US dollar briefly crashed through the 115-yen level to its lowest since November 2014.

Japanese Finance Minister Taro Aso said on Tuesday the yen’s recent moves were “rough”, issuing a verbal warning to markets against pushing up the currency too much and eroding the positive effects of premier Shinzo Abe’s stimulus policies.

“It’s clear that recent moves have been rough, Aso said after a cabinet meeting. I’ll keep a close watch on movements in the foreign exchange market.”

Exporters were hammered, with Toyota Motor falling 6.1 per cent, Honda Motor diving 6.7 per cent and Nissan Motor tumbling 7.2 per cent.

As investors have become risk averse, securities firms were battered as well. Nomura dived 9.1 per cent while Daiwa Securities declined 5.2 per cent.