By Yuka Yamamori
Tokyo, Nov. 17 (Jiji Press)–The key Nikkei average plunged below the psychologically important 10,000 line Monday, as individual investors turned to sell in view of a halt in buying by foreign players amid renewed worries over the course of the Japanese economy and geopolitical risks.
The 225-issue Nikkei average finished down 380.23 points, or 3.7 pct, at 9,786.83, the lowest closing level since Aug. 13.
“During the course of the Nikkei’s latest rally, the market had largely factored in expectations for accelerated disposal of nonperforming loans at major banks and for an early end to deflation,” said Masatoshi Sato, senior strategist at Mizuho Investors Securities Co. “But now such hopes were wiped off.”
Traders said nonresidents turned net sellers in recent sessions in a move to take profit before many hedge funds’ book closings in November. And some other participants expect the foreigners to remain in the sidelines amid growing disappointment at slow progress in Prime Minister Junichiro Koizumi’s reforms.
Concerns over banks’ bad loan problems were renewed by news Friday that the Financial Services Agency found it necessary for eleven major Japanese banks to book losses totaling 900 billion yen related to bad loan disposals for the April-September first half.
In addition, Fumiyuki Nakanishi, equity strategist at SMBC Friend Securities Co., said, “A possible tax hike in the next fiscal year would hamper personal consumption and prevent Japan from getting out of deflation at an early date.”
After accumulating long margin positions on such issues as Internet-related Softbank and banks, individual investors were badly hurt in the selloff on Oct 23, when the Nikkei average suffered the biggest point loss in more than two years, and have begun accelerating selling in order to avoid massive margin calls, market sources said
Investor sentiment soured also because French news agency Agence France-Presse reported Sunday that the Al-Qaeda terrorist network warned of an attack on central Tokyo if Japan sends troops to Iraq, brokers said.
Analysts said further correction is unavoidable.
But the market is not necessarily dominated by a bearish mood, with some traders expecting its medium-term uptrend to remain intact given increasing corporate earnings and the release of stronger- than-expected economic indicators like gross domestic product for July-September in Japan.
Tsuyoshi Segawa, equity strategist at Shinko Securities Co., pointed out that recovery prospects for Japan and the United States have not diminished, saying that in both nations “the economic fundamentals remain unchanged.”END
