WK.39(26th - 30th September 2011)
1
Stocks suffered heavy falls in trading in Tokyo on Monday as investors reacted to the losses on other world markets on Friday when Japan was closed for a national holiday. The sell-off was triggered by the failure of G20 finance ministers meeting in Washington at the end of last week to agree on concrete action to tackle the Euro-zone debt crisis and global economic weakness. Exporters declined as the Euro hit a fresh 10-year low of Y103 against the Yen. Consumer electronics and entertainment giant, Sony, tumbled 4.1% while, among automakers, Toyota slid 1.7% and Komatsu, the world’s second-biggest manufacturer of earth-moving equipment after Caterpillar of the US, shed 3.6%. Fanuc also slumped 3.6% on fears of a slowdown in demand for the company’s industrial robots. Nippon Electric Glass, which makes the glass used in liquid crystal display (LCD) panels, plummeted 12.3% after forecasting worse than expected profits for the six months through to the end of September because of disappointing flat-panel sales. And Elpida Memory sank 6% on news that South Korean rival, Samsung, has started mass production of new flash memory chips used in tablet computers and smart-phones. Resource-related issues, too, were under pressure following drops in the price of oil and base metals. Mitsubishi Corporation, Japan’s largest trading house, plunged 7.9% and rival, Mitsui & Company, sank 5.9%. In the telecommunications sector, KDDI lost 8% and Softbank skidded 5%. KDDI, Japan’s second-biggest mobile phone network operator, has been bought recently (and Softbank sold) on rumours that it is in talks with Apple to sell the new iPhone 5 and put an end to Softbank’s position as Apple’s sole iPhone vendor in Japan, but lack of any formal announcement has begun to make investors nervous. Overall, the Nikkei average closed down 2.2% at 8,374 to register its lowest finish since April 2009. The broader Topix index fell 2.1% to end at 729. Trading volume was moderately high with 2.1 billion shares exchanging hands.
2
Japanese share prices bounced back strongly in trading in Tokyo on Tuesday following media reports overnight that European Union (EU) officials are in talks to leverage up the European Financial Stability Facility (EFSF) eight-fold to €2,000 billion and use the European Investment Bank (EIB) to issue bonds and buy up the sovereign debt of troubled Euro-zone countries via the European Central Bank (ECB). Such action would be aimed at finally containing the debt crisis in Greece and preventing its spread via contagion to other EU economies. The upbeat mood was reinforced by growing expectations that the ECB might cut interest rates and adopt other credit easing measures at its next policy-setting meeting on October 6 to increase liquidity and help stabilize the situation. Banks were higher. Mitsubishi UFJ, Japan’s biggest bank, jumped 4.3%, Sumitomo Mitsui Financial Group (SMFG) climbed 3.4% and Mizuho Financial was ahead 1.8%. Automakers also gained. Nissan leapt 4.5% and Fuji Heavy Industries (FHI), which manufactures cars under the Subaru brand, surged 4.7%. In the telecommunications sector, NTT DoCoMo, Japan’s largest mobile phone network operator, edged up 0.1% on news that its entire handset line-up will be smart-phones by November. But Softbank shed another 1.6% and remained under pressure from the likelihood that rival, KDDI, will soon be authorized by Apple to begin selling the iPhone 5, ending Softbank’s reign as the exclusive vendor of iPhones in Japan. Elsewhere, engineering firm, JGC, soared 4.7% following a rating upgrade from securities brokerage, CLSA, which cited an improved business outlook. But Tokyo Electric Power (TEPCO) tumbled 6.2% to a three-month low after a report estimated the utility’s compensation liability for the nuclear crisis at its Fukushima Daiichi plant at up to Y4,000 billion (US$50 billion). Projections also showed that TEPCO will run out of cash unless it is able to re-start idle reactors at its Kashiwazaki-Kariwa nuclear power plant in Niigata or is allowed to raise electricity rates. The Nikkei average closed up 2.8% at 8,691 while the Topix index added 2.7% to finish at 749. Trading volume was moderate with 1.9 billion shares exchanging hands.
3
Share prices failed to extend their upwards momentum in trading in Tokyo on Wednesday and ended more or less flat. Optimism over efforts to resolve the Euro-zone debt crisis proved short-lived even though the Greek parliament passed an unpopular property tax bill overnight to boost its finances and German Chancellor, Angela Merkel, pledged her support in a meeting with Greek Prime Minister, Georges Papendreou. A proposed increase in the European Financial Stability Facility (EFSF) to help debt-stricken Greece still faces opposition in the German parliament and is scheduled to be put to a vote there on Thursday. Signs of economic weakness in the US also weighed on markets following the release of disappointing data on home prices and consumer confidence levels. On the Tokyo Stock Exchange (TSE), Japan Tobacco, the world’s third-biggest manufacturer of cigarettes, added 2.9% after the government said it is considering the sale of its 50% stake in the company to raise funds for rebuilding and reconstruction in the north-east region, which was severely impacted by the March 11 earthquake and tsunami. The ruling Democratic Party of Japan (DPJ) also indicated that it might sell shares of energy companies held by the government, although an official later explained that this would run counter to existing policy. Inpex Corporation, Japan’s largest oil and gas field developer, advanced 0.4% and rival, Japan Petroleum Exploration (JAPEX), climbed 1.3%. In other sectors, Daikin Industries, a leading maker of air-conditioning units, rose 2.8% on saying that operating profits in the year to March 2012 are likely to exceed its earlier estimate of Y90 billion. And Softbank, which has shed 20% of its value over the past few days on speculation that it is about to lose its position as the sole vendor of Apple’s iPhone in Japan, bounced back 3.8% on bargain-hunting. In contrast, Fast Retailing, owner and operator of the Uniqlo brand of casual clothing stores and a recent strong performer, slumped 3.8% on concerns that the stock may be over-bought. Overall, the Nikkei average closed up 0.1% at 8,616. The more comprehensive Topix index was ahead 0.7% to finish at 754. Trading volume was again moderate with some 1.9 billion shares exchanging hands.
4
Stocks advanced again in trading in Tokyo on Thursday on hopes for a positive resolution to discussions on beefing up the European Financial Stability Facility (EFSF) as a step towards containing the debt crisis in the Euro-zone. The German parliament is scheduled to vote on the measure later in the day and, despite considerable opposition within the government of Chancellor, Angela Merkel, it is expected to pass. Banks were higher. Mitsubishi UFJ and Sumitomo Mitsui Financial Group (SMFG) both added 2%. Automakers were also in favour thanks to increased production levels in August as output continues to recover from the March 11 earthquake and tsunami, which knocked out assembly and parts facilities. Toyota, which saw global production expand more than 10% in August from the same month a year ago, was ahead 0.9% while Nissan gained 3.8% and Mazda Motor jumped 4%. Bus and truck manufacturer, Hino Motors, leapt 4.2%. Resource-related issues, however, lost ground as prices for oil and base metals drifted lower. Mitsubishi Corporation, Japan’s largest trading house, slid 1.7% and rival, Mitsui & Company, shed 2%. Retailers, too, were under pressure following the release of retail sales figures for Japan that showed a decline for the first time in three months. Seven & I Holdings, which as Japan’s biggest retailer operates department stores, supermarkets and convenience outlets, fell 2.6%. Elsewhere, game developer, Konami, surged 5.3% on a rating upgrade from Citicorp, which cited good earnings prospects from its social gaming business. The Nikkei average closed up 1% at 8,701 while the Topix index climbed 1.1% to finish at 762. Trading volume was moderately high with some 2.2 billion shares exchanging hands.
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Figures released by the government on Friday revealed that Japan’s industrial production rose 0.8% in August from July for the fifth straight month of increase, prompting the Ministry of Economy, Trade & Industry (METI) to declare that output has almost recovered from the devastation wrought by the March 11 earthquake and tsunami. However, despite this good news and the successful passage of a vote in the German parliament overnight to approve a strengthening of the European Financial Stability Facility (EFSF) and deal with the debt crisis in the Euro-zone, investors remained cautious. On the Tokyo Stock Exchange (TSE), the focus was on specific issues. Exporters fell as the Euro weakened against the Yen and slipped back below Y104. Printer/copier and digital camera manufacturer, Canon, eased 0.3%, Olympus slid 1.3%, and Nintendo shed 1.7%. Consumer lenders jumped on reports, later confirmed, that Sumitomo Mitsui Financial Group (SMFG) plans to acquire all the stock of Promise that it does not already own in a deal worth some Y80 billion. Promise rocketed 17.9% while Aiful leapt 7.6% and Acom added 2% on hopes of further consolidation in the sector. But wire and cable manufacturers tumbled on news that Furukawa Electric has reached a plea agreement with the US Department of Justice to pay a fine of US$200 million for its role in an alleged price-fixing and bid-rigging cartel involving auto-parts sales in the US over a decade. Furukawa Electric slumped 6.2% and rivals, Sumitomo Electric and Fujikura, sank 8% and 6.2% respectively. And telecommunications giant, KDDI, fell 3.4% on saying that it would recall up to 2 million mobile phone handsets because of problems with batteries overheating. Elsewhere, Isuzu Motors climbed 2.8% after the truck maker announced plans to build a new factory in Thailand and boost annual production by 50% to 400,000 vehicles. Overall, the Nikkei average closed marginally lower at 8,700. It was up 1.6% for the week but down 2.8% for the month and 11.4% for the quarter to register its worst three-month performance since June 2010. The broader Topix index declined 0.2% to finish at 761, a loss of 10.4% over the quarter. Trading volume was average with about 2 billion shares exchanging hands.
