| Article: 6381
From: [email protected] (MIKE KOLLER)
Newsgroups: clari.biz.market,clari.biz.invest,clari.biz.economy.world
Subject: Stock market plunges to year's low
Date: Mon, 29 Nov 93 10:20:50 PST
TOKYO (UPI) -- The Tokyo stock market Monday took a roller coaster
ride freefalling down more than a thousand points, sending share prices
to their lowest for the year, mostly on poor bank earnings reports.
The Nikkei plummeted more than a thousand points to 15,715.97 in
early afternoon trading before climbing back to finish the session at
16,078.71.
Stunned investors panicked and arbitrageurs sold major indexes before
the afternoon rebound.
A host of ills ganged up on the market to deplete its lifting power,
analysts said, with poor earnings reports by banks leading the decline.
``Bank shares sold heavily as bad loan levels were reported at trust
banks,'' said Bob Jameson, a trader at Dresdner Securities. ``The
feeling is the reports are not complete and banks might have to cut
dividends to remain profitable.''
``There was a lot of index selling, a lot of margin calls,'' Jameson
added. ``Now the market has fallen below its level at the start of the
year, and that's putting a lot of portfolios under water.''
In a symptom of the crisis afflicting the economy, banking sources
said both long-term and short-term lending rates are poised for a cut
after key interest rates and bond yields eroded in the weak economy.
But frustration with government dawdling over political reform and
the foreign rice import debate wore down investor confidence in its
commitment to the market.
The government is sitting on its hands and not helping either,
Jameson said, despite sympathetic noises about concern over the economy.
``Progress on political reform steps is stalled, and now the
government is beginning to focus on the rice issue, which delays
concentration on the economy even more,'' Jameson said.
In a further sign of economic malaise, the Ministry of International
Trade and Industry reported industrial production fell 3.8 percent in
the July-September quarter.
MITI said the decline was the longest uninterrupted slump in
industrial output ever.
Investors hoping the government will lay floorboards under the
rickety market are likely to be disappointed, said Mineko Sasaki-Smith.
``I don't think the Ministry of Finance or (centra) Bank of Japan
will support the market,'' said Sasaki-Smith. ``High artificial share
prices would result in low volume.''
``They think that if you let the market find its natural bottom,
volume will increase and lead to more consumption.''
Vice Finance Minister Jiro Saito squelched any notions of government
intervention to prop up the market, saying it would be pointless to do
so.
``It doesn't make sense if we implement (new measures) now because
stock prices are falling,'' Saito said.
The banking sources told the Kyodo News Service Japan's three long-
term credit banks were likely to cut their long-term prime rates by 0.2
percentage points,in December for the fifth straight month from the
current record low 3.8 percent per annum.
At the nation's 11 commercial banks, a 0.25 percentage point
reduction in short-term prime rates to an annual 3.125 percent is being
mulled also, the sources said.
Both rates are the amount charged on loans to the most credit-worthy
borrowers.
The economy could use the booster, analysts said, as industrial
output slides.
Using 100 for 1989 as a base, the nation's industrial output stayed
at 91.7 in the July-September period, unchanged from the previous
quarter.
Output increased in seven of 15 major sectors, including electrical
equipment, telecommunications equipment, nonferrous metals and precision
instruments, MITI said.
But steel, chemicals and transport machinery sank, MITI said.
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| Hello,
Would anyone care to give their opinion on Japan now.
It's been some time since any opinions were voiced, and
the magazine Investors Chronicle last week was quite optimistic.
Do you think it has bottomed out, and if there is much room
from growth? Also, how do you think it compares as an investment
to the emerging economies which are growing very fast, but have
been hyped quite a lot over the last year?
Thanks
Malcolm
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| There's lots of press around about the imminent float of the state-owned
Japan Tobacco, and how the likely(?) failure of this float would depress
the market as a whole.
Although Japan Tobacco has attempted to diversify recently, 97% of
revenue is still tobacco-related. Then there are competitive issues :
the tobacco industry is recognised, even in Japan, as being nil-growth.
Currently ~80% of the cigarettes sold in Japan are ex. Japan Tobacco,
with Philip Morris and others marketing heavily and making inroads.
The privatisation programme is already well behind schedule, and any
further delays just add to investor uncertainty.
Personally, I question the markets ability to absorb a float of this
size (capitalisation ~$20B from memory) and remain bouyant at this
time. It is a big ask from investors, who will undoubtedly have to
sell down other holdings as they re-weight their portfolios.
IMHO would use the market reaction to this float as a gauge of
institutional investor sentiment in general.
Regards,
Peter.
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