Tokyo, Hong Kong, London — Tokyo's Nikkei average fell for a third straight day to close at a three-month low on Friday in a broad-based decline led by banks like Mizuho Holdings amid doubts about Japan's fragile economic recovery.
The Nikkei lost 2.01 per cent or 224.21 points to 10,920.63, its lowest close since since March 1. The broader, capital-weighted TOPIX index gave up 1.89 per cent to 1,054.26, also Selling picked up steam near the close after news of a car bomb explosion outside the U.S. consulate in Karachi, Pakistan, triggered investor jitters about geopolitical unrest.
Trading volume spiked due to Friday's special quotation (SQ) for settlement of Nikkei June futures and options. The SQ was 11,157.48, the Osaka Securities Exchange said after the close.
A whopping 1.61 billion shares changed hands on the first section of the Tokyo Stock Exchange, more than double Thursday's total.
Volume always shoots up on the SQ date as investors close out futures and options positions and other investors take advantage of a rise in liquidity.
Decliners overwhelmed advancers 1,125 to 267.
Falls were led by domestic demand-related sectors, such as banks and real estate, which are starting to reverse the strong gains enjoyed in recent months. Investors had snapped them up on hopes the domestic economy was turning around.
A falling market eats away at the value of banks' massive shareholdings, which, along with any faltering in Japan's nascent economic recovery, could impede progress on the disposal of their bad loans.
Mizuho Holdings Inc., the world's largest bank by assets, dropped 5.1 per cent to 298,000 yen, while second-largest Sumitomo Mitsui Banking Corp. fell 5.41 per cent to 612 yen and was the most active issue in volume terms.
The banking sector subindex drew back 3.62 per cent.
Among real estate stocks, Mitsui Fudosan Co. Ltd., Japan's biggest property developer, gave up 3.16 per cent to 1,104 yen. Sumitomo Realty and Development Co. Ltd. was down 4.83 per cent at 748 yen.
The Bank of Japan upgraded its view of the economy for the fourth straight month on Thursday, but traders say much of the optimism is factored in.
On Thursday surprisingly soft U.S. retail data dampened investors' hopes for a swift rebound in corporate profits, putting pressure on Japan's blue-chip exporters.
Consumer electronics giant Sony Corp., which relies on the U.S. for one third of its sales, slid 2.24 per cent to 6,560 yen, a three-month nadir. Leading automaker Toyota Motor Corp. tumbled 2.16 per cent to 3,170 yen.
On the policy front, Prime Minister Junichiro Koizumu told ruling coalition lawmakers on Thursday the government would introduce some tax cuts on Jan. 1, before a broader tax system overhaul was implemented in the next fiscal year from April, 2003.
The early moves could include tax incentives to facilitate corporate spending on research and development.
But analysts say any tax cuts are likely to be balanced by rises in other areas in order to fulfil Prime Minister Koizumi's pledge to keep annual government bond issuance within 30 trillion yen ($240-billion U.S.).
And a number of government share offerings including that of East Japan Railway Co. (JR East), Japan's largest railway operator, which is planned for later this month, may increase bearish sentiment, analysts said.
An offering of Japan Tobacco Inc. (JT) shares held by the government is expected in July.
Hong Kong — Hong Kong's key share index ended sharply lower on Friday, breaking below its key psychological support of 11,000 as soft U.S. retail sales renewed concerns over the pace of recovery in the world's largest economy.
Investors were cautious as they awaited details on the government's third-quarter sale of blue-chip shares, analysts said.
The benchmark Hang Seng Index ended down 1.47 per cent, or 163.81 points, at 10,955.52 and lost 2.92 per cent on the week. Turnover stood at HK$7.24-billion ($928-million U.S.), in line with an average of HK$7.42-billion over the past 20 days.
The government is due to announce later in the day the size of its latest sale of Tracker Fund units, comprising blue-chip shares accumulated during its stock market intervention in August, 1998.
Market watchers expect the third-quarter sale to be between HK$6-billion and HK$8-billion. The sale will likely weigh on share prices by creating additional supply of blue-chip shares in the market.
But many analysts remain upbeat about the longer-term outlook, as the local economy should benefit from a U.S.-led recovery.
Top blue-chip losers included investment holding and property rental firm Wheelock & Co., which ended down 3.7 per cent at HK$6.50 after it reported full-year net earnings that were below analysts' expectations.
The company posted during the lunch break a net profit of HK$546.6-million for the year ended March 31, up 4.5 per cent from a year earlier but well below a consensus forecast of HK$1.34-billion according to Multex Global Estimates.
Wheelock said its profit included a provision of HK$1.25-billion for the decrease in value of its properties.
On the broader market, investors were unnerved by weaker than expected May retail sales figures from the United States, the territory's second largest export partner.
U.S. retail sales, the major engine of America's economic growth, posted the sharpest monthly decline since November, hurt by slower auto sales and lower petrol prices.
Consumer goods sourcing firm Li & Fung, one of Hong Kong's largest exporters, took a beating from the data falling 4.23 per cent to HK$10.20.
Smaller-capitalized stocks in the sector, such as eyewear maker Moulin International and silk clothes maker High Fashion International, also suffered.
Moulin shares lost 2.6 per cent to HK$0.75, while High Fashion was down 2.27 per cent at HK$2.15.
Elsewhere, battery and electronics maker Hikari Tsushin International plunged 24.27 per cent to HK$0.156 after it said its stake in a recently-formed joint venture with the China Gas Bureau had been reduced.
The loss-making company had moved into the natural gas pipeline network business to boost earnings.
Overall, losers swamped gainers by 419 to 99, with 274 stocks unchanged.
London — Britain's FT-SE 100 skidded deeper into eight-month lows on Friday after a Wall Street slide on surprisingly soft U.S. retail sales data, suggesting weaker consumer demand which until now was seen as aiding recovery.
By 0957 GMT, the blue-chip U.K. index was down 123 points or 2.6 per cent to 4,649.4, back to levels seen late in September last year when prices shot back up from a post-Sept. 11 low of 4,220.
The index has now lost around 270 points or more than 5 per cent over the week and market watchers see no respite as investors sink into gloom about the outlook for economic recovery and the prospects for U.K. interest rate rises.
Weaker U.S. stock index futures pointed towards more selling pressure on Wall Street after a 1 per cent fall on Thursday for the Dow Jones industrial average and a 1.5 per cent slide on Nasdaq.
Traders said sluggish U.S. retail sales data called into question the pace and extent of a recovery which many have been hoping would boost company fortunes and spur market gains.
Mobile giant Vodafone dived 5 per cent to 90 pence, hurt by news its Japanese J-Phone unit had raised subsidies on about half the handsets in the Japanese market in response to competition.
News U.S. phone company Sprint said subscriber growth at its wireless unit would miss its target because of discounting by competitors and another warning on revenues by embattled U.S. telecom equipment maker Lucent were also hitting the shares, dealers said.
Banks took about 36 points off the FT-SE 100, jittery after comments from the Bank of England on Thursday warning of U.K. interest rate hikes. Barclays fell 3 per cent and Royal Bank of Scotland lost 4.3 per cent.
Fund manager Amvescap, heavily exposed to the U.S. market, fell 8.4 per cent on concerns that markets were set to fall further. Among insurers, Prudential fell 4 per cent.
Market watchers said worries about U.K. interest rates were back to the forefront after Thursday's FT-SE setback on remarks from Bank of England governor Sir Edward George, warning that the bank would have to move rates up to damp down consumer spending driven by a house-price boom.
Market nerves were jangled further by talk that Anglo-Dutch steel group Corus Plc would hightlight problems in the manufacturing sector by issuing a profit warning. The shares fell 11.2 per cent to 79½p.
Gas utility BG Group rose 1 per cent making it the only gainer on the FT-SE 100 as investors scraped around for defensive plays with the FT-SE seen heading back towards 4,500.
Market watchers say the FT-SE 100 might have to fall back to the post-Sept. 11 lows before things get better in the absence of bullish corporate news.
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