Rush to Sell Shuts Down Tokyo Stock Exchange [NYT]
By JAMES BROOKE
TOKYO - An avalanche of sell orders forced Tokyo’s stock market to close early Wednesday, with the main benchmark closing down 2.94 percent after plunging almost as much on Tuesday.
The trigger was a prosecutors' raid Monday night on the offices of Livedoor Co., a fastgrowing Internet services group. Livedoor shares did not trade Wednesday for lack of buy orders, but they were marked down by the daily 100-yen limit for a second day in a row to 496 yen.
At that price, more than $1.8 billion of the company's market value would be wiped out.
With the abrupt tumble, analysts debated whether the damage would stop Thursday with Internet stocks or whether it would pull down the world’s second largest market, a bourse that grew 40 percent last year, drawing investors from around the world.
"This thing has taken on greed, panic and fear," said James Fiorillo, an American who advises the Japan Natural Selection Fund, one of many foreign funds that heavily expanded investments here last year. "Banks and trading companies are getting hammered and their business are doing well in this economy."
Takafumi Horie, a 33-year-old bristled haired billionaire who wears T-shirts to press conferences, enraged Japan’s business establishment over the last two years by trying a hostile takeover of a radio network and by trying to buy a baseball team. Both attempts failed. But they did not seem to dent his ability to make billions of yen from his Internet portal and related ventures. Now, according to media reports, prosecutors are investigating allegations that Mr. Horie cooked his company’s books, turning a 2004 loss into a profit.
In a market where individuals accounted for 50 percent of trades last year, investors panicked Wednesday, sending in more trade orders than Tokyo’s often troubled market computer system could handle.
Compounding investor anxiety, stock exchange officials announced in advance that the order volume was expected to reach the system’s capacity of 4.5 million trades a day, forcing an early close. After normally instantaneous trades started to take five minutes and more to complete, exchange officials closed the market 20 minutes before the normal 3 p.m. closing time.
"The recent spike in orders is extraordinary," Taizo Nishimuro, president of the Tokyo Stock Exchange, told reporters. If trading continues Thursday at extremely high volumes, he said, "We will consider shortening stock trading hours."
Wednesday was the first time the exchange was forced to halt trading due to insufficient computer capacity. The computer capacity had been increased in recent weeks after a malfunction forced suspension of trading Nov. 1 for nearly the entire day.
Since Monday, the market has lost almost $400 billion in value, roughly the annual gross national product of Sweden. On Friday, the market hit a five year closing high. On Wednesday the bellwether Nikkei 225 Stock Average it closed at 15,341.18, down a combined 926.85 points since Tuesday.
To calm investors, Chief Government Secretary Shinzo Abe told reporters Wednesday afternoon: "The fundamentals of the Japanese economy are firm and it's heading in the right direction."
Hours earlier, the alarm over Livedoor spread to other Internet stocks. Yahoo Japan fell by almost 10 percent. Softbank fell by 13 percent, its maximum allowable price movement.
"Our fund managers think that the next couple of days will be choppy," Alexander M. Prout, president of Invesco Asset Management (Japan) Ltd., said after trading ended Wednesday. Mr. Prout, who said he manages $5.3 billion in Japanese equities, blamed this week’s market scare on "media hysteria."
"Anytime there is a quick run up in the market place, there is that breathing pause," he said referring to the Tokyo market’s sharp climb in the second half of last year. "But because there is nothing fundamentally wrong, when the lull settles you will see buying opportunities."
But many market observers believe they may be hearing the popping of a mini-Internet bubble.
"If Livedoor did not disclose correct data for their financial statement, that is big, sort of a similar situation to Enron," Nobuo Sayama, a business professor at Hitotsubashi University said after the market closed Wednesday. Referring to the Internet companies that have clustered in Tokyo’s prestigious new hotel and office tower, he said, "This event is a start of big problem that will expand to other Roppongi Hills companies. They will be attacked later on."
But Mr. Sayama, like the Americans interviewed here, said he believed that Japan’s economic fundamentals are sound.
"In the Japanese market, the new companies are overvalued, and the old companies are undervalued," he said. "Not the whole market, but some of new companies are too high, and so stocks may go lower."
Mr. Fiorillo predicted that this week will eventually be seen as "a speed bump" on the way to the Nikkei breaking 20,000. But, he said of Japanese individual investors: "There was an Internet bubble in the U.S., so people felt there was one coming here again." |
