Tokyo's Nikkei ends at 20-year low, blue chips hit
Fri April 11, 2003 03:06 AM ET
TOKYO, April 11 (Reuters) - Japanese stocks thudded to a 20-year closing low on Friday, with Toyota Motor Corp 7203.T and other blue chips hurt by pension fund selling and worries about sluggish demand in the global economy.
Auto giant Toyota, top retailer Ito-Yokado Co Ltd 8264.T and other issues that have a relatively high weighting in corporate pension funds were among the biggest losers.
The Nikkei average .N225 slid 2.05 percent to 7,816.49, its lowest level since January 1983. It was down 3.19 percent on the week. The broader TOPIX index .TOPX fell 1.28 percent on the day to 782.25.
"Big stocks like Sony and Toyota are being dumped by pension funds regardless of their fundamentals," said Koichi Seki, equity manager at Chuo Securities' sales department.
"Normally this would be regarded as a great chance to buy cheap, but investors are worried that such selling has still not hit its peak," he added.
Seki believed the Nikkei would drop as far as 7,500 by the end of the month, which would be its lowest since late 1982.
Toyota shed 3.85 percent to a seven-year low of 2,500 yen, while Ito-Yokado tumbled 8.13 percent to 2,940 yen, its lowest close since November 1987.
Ito-Yokado's fall came a day after it said its group net profit fell 59.8 percent in the business year ended February 28 due to the rising cost of store closures and renovations.
Toyota and Ito-Yokado are widely held by corporate pension funds, which are selling stocks to take advantage of rule changes that allow them to return part of their poorly performing pension assets to the state later this year.
Daiwa Institute of Research strategist Kazuhiro Miyake says the funds will dump around three trillion yen ($25.10 billion) of stocks in the current business year.
That's equal to around five times the average daily value of shares traded on the Tokyo bourse. Traders said that worries about the pension funds were creating a vicious circle of selling as investors dumped shares, fearful of further falls.
Sony Corp 6758.T , the world's biggest consumer electronics maker, was the most active issue by volume and fell 3.58 percent to 3,770. It earlier touched a four-year low of 3,750 yen.
Blue chip exporters like Sony are also being hurt by worries that, despite the likelihood of a quick end to the war in Iraq, global demand will remain sluggish.
"In the background are worries about the United States economy as the war draws to a close. And I'm not too optimistic about U.S. consumers. I think they are overstretched," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Trading was active, with 703 billion yen of shares traded on the first section, up 33 percent from Thursday and only the fourth time this year that the total has risen above 700 billion.
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