Happy Turkey day everybody!
Tokyo: Calm urged in face of low confidence
Finantial Times: THURSDAY NOVEMBER 27 1997
Finance minister and Bank of Japan call for 'sensible' action, write
Gillian Tett and Paul Abrahams in Tokyo. The Japanese government took
the rare step of appealing for calm yesterday, amid signs that investors
were losing confidence in the country's financial institutions.
Hiroshi Mitsuzuka, finance minister, and Yasuo Matsushita, Bank of Japan
governor, issued a joint statement "strongly requesting people not to be
guided by groundless rumours and to act sensibly".
The warnings followed the collapse yesterday of the shares of several
financial institutions. The Nikkei 225 average was up 178.02 points, or
1.12 per cent, to 16,045.55 but shares in the broking and banking
sectors fell an average 7 per cent and 2.6 per cent respectively, but
some shares plunged more than 30 per cent.
Two of Japan's big three securities companies dropped sharply. Daiwa
Securities tumbled a maximum 100 to 446 and Nikko Securities fell 72
to 312. Analysts said there were fears the companies would be
implicated in illegal off-balance sheet dealings similar to those that
brought down Yamaichi Securities, the country's fourth-largest broker,
earlier this week.
Seven second-tier brokers are now quoted below the danger level of 100.
Taiheiyo Securities, a small broker linked to Yamaichi, denied it
planned to close after its shares dropped 22 per cent to 40.
"The markets are highly nervous and are losing confidence in the
financial system," said Peter Tasker, strategist at Dresdner Kleinwort
Benson. "After the failure of Yamaichi, it is clear that size is no
protection." Analysts said the risk of investing in Japan had increased
substantially, because it was no longer certain that the ubiquitous
corporate families, or keiretsu groupings, would
protect all their members.
But investors were finding it difficult to assess the risks facing
individual companies because of poor disclosure and fears of further
hidden debts or losses similar to those uncovered at Yamaichi.
Bank shares also tumbled, following the announcement by Tokuyo City
Bank, a regional bank, early yesterday morning that it was closing its
business.
Shares in Daiwa Bank, one of the country's largest, fell 27 per cent to
130. They have halved in value in two days' trading. Long Term Credit
Bank dropped 80, or 29 per cent, to 196, while Mitsui Trust's shares
dropped 32 per cent to 167, Fuji Bank fell a maximum 100 to 626, and
Yasuda Trust 38 per cent to 79.
Adding further to the banks' plight, Moody's, the US ratings agency,
said it was considering downgrading the debt of Long Term Credit Bank,
Mitsui Trust, Yasuda Trust, Nippon Credit Bank and Chuo Trust.If the
last two are downgraded, their debt would have junk-bond, non-investment
status. It was a similar downgrading that precipitated the collapse of
Yamaichi. |
