Sunday research.
This article talks about the precipitous fall in the Nkkei this past week and its connection to the Nasdaq:
WEEK AHEAD-Tokyo stocks weaker, techs have room to slide
By Nathan Layne
TOKYO, March 4 (Reuters) - Tokyo stocks are seen moving
further south this week as Japan's blue-chip techs stay
vulnerable to a slumping U.S. Nasdaq and poor investor
sentiment.
"It doesn't look like the Nasdaq's fall is over and that
spells trouble for the techs this week, especially electronics
firms," said Hiroshi Arano, director of the investment trust
management department at Dai-Ichi Kangyo Asset Management.
The benchmark Nikkei average <.N225> slid 3.31 percent to
12,261.80 last Friday, hit by heavy losses in technology issues
such as Oracle Corp Japan <4716.T> after U.S. parent Oracle
Corp <ORCL.O>, the world's second largest software firm, cut
earnings estimates for the third quarter.
It was the Nikkei's lowest close since July 31, 1985 when
it ended at 12,232.27.
The U.S. Nasdaq composite index <.IXIC> buckled under the
Oracle warning on Friday, plummeting 3.01 percent or 65.74
points to a fresh 26-month nadir of 2,117.63.
The Nikkei shaved off a hefty 7.4 percent last week,
shrugging off the Bank of Japan's (BOJ) rate cuts amid an
onslaught of data suggesting its ailing economy was faltering
further.
"If people's confidence in the economy dissipates -- very
well possible given the data -- we could see the Nikkei fall
considerably lower, maybe another 10 or even 20 percent," said
Marc Desmidt, manager of the Japan equity team at Merrill Lynch
Investment Managers, referring to government data released last
Wednesday that showed industrial output data fell a shocking
3.9 percent in January.
Market sources predicted the Nikkei to move between 12,000
and 12,500 this week.
WHERE TO HIDE?
Traders said low-priced stocks and defensive issues such as
pharmaceuticals, utilities, and steel firms were the safest
play in the present environment.
"Investors will be looking for refuge in shares not
susceptible to swings in the Nasdaq," said Yutaka Miura of
Shinko Securities.
Tokyo Gas Co Ltd <9531.T> firmed 3.16 percent, and Tokyo
Electric Power <9501.T> gained 1.31 percent amid Friday's tech
fallout.
Hideki Kamiya, senior fund manager at Asahi Tokyo
Investment said the steep fall in the capital-weighted TOPIX
index <.TOPX> was worrisome and deserved more attention as it
signified a broad-based, non-tech specific downtrend.
The TOPIX fell 2.24 percent on Friday to 1,199.84, touching
below 1,200 for the first time since March 1999.
"The fall in large-caps stocks is perhaps most scary,"
Kamiya said, noting heightened downside risk this week ahead of
the pending settlement of the special quotation (SQ) of March
Nikkei futures and options on Friday.
Friday marks a "double witching" session or the
simultaneous expiration of options and index futures, which can
raise volatility.
Analysts said derivatives-related selling, mainly
structured bonds with returns linked to the Nikkei's level, was
partly to blame for the Nikkei's descent and could accelerate
if the average dips further.
The so called "Nikkei-linked bonds" offer higher interest
rates than ordinary bonds if the Nikkei stays above a
pre-determined level.
The Securities and Exchange Surveillance Commission of
Japan has launched a probe into foreign brokerages for their
trading in these stock-index-linked bonds, citing unnatural
developments related to the market's dive, the Saturday edition
of the Mainichi newspaper reported. |
