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Strategies & Market Trends : JAPAN-Nikkei-Time to go back up? -- Ignore unavailable to you. Want to Upgrade?

To: Step1 who wrote (1531)	10/23/1998 6:32:00 PM
From: chirodoc	Read Replies (1) \| Respond to of 3902

Friday October 23 1998 Nomura sheds 2,000 on $13b interim loss AGENCIES in Tokyo Nomura Securities yesterday announced a massive restructuring that will cut at least 2,000 jobs from its payroll by early 2001. The shake-up was announced after Nomura, Japan's biggest brokerage, revealed a huge group net loss of 207.26 billion yen (about HK$13.74 billion) in the half-year to September 30, as global market turmoil ravaged all of the country's top three finance houses. Nomura's losses - which follow a group net profit of 49.71 billion yen in the same period a year earlier - include a US$600 million hit from its United States mortgage bond dealing. The broker's US operations took a 159.8 billion yen pretax loss in the half, against a 1.7 billion yen profit last year. Elsewhere, losses at the pretax level amounted to 66.9 billion yen in Europe and 16.6 billion yen in Asia. Nomura president Junichi Ujiie said: "We could not have foreseen a sudden loss of investor confidence in credit risk across the world like this. "When markets went global, we didn't have a global risk-management system in place," Mr Ujiie said. "If we are successful in implementing our business plan, we expect to be profitable by the end of the next fiscal year, or the year after." Losses on emerging market equities snowballed as investment funds suddenly shifted in huge numbers into safer investment vehicles. Prices of high-risk shares and bonds plunged before the brokerage could unwind positions, the firm said. Mr Ujiie said the restructuring aimed at lowering personnel costs by 20 per cent. Nomura's restructuring plan will see it move away from risky overseas products - although it will continue its commercial mortgage-backed securities operations in the US - to concentrate on domestic retail businesses. "If the product has reasonably high risk, or is not very liquid, we will not be trading it," Mr Ujiie said. Nomura was not the only Japanese brokerage burned by a currency crisis that has stricken emerging markets. Second-ranked Daiwa Securities posted a net group loss of 66.84 billion yen in the half-year period against a 15.53 billion yen profit a year earlier. Nikko Securities racked up a 57.72 billion yen loss against a 1.51 billion yen profit a year earlier. Both announced cost-cutting measures with Daiwa saying it would reduce its personnel by 1,500 people by the year 2000 through attrition. Nikko announced it would sell 40 billion yen in property holdings in Hong Kong and close offices in Thailand and Malaysia. Nomura's heavy losses had been widely expected. The brokerage admitted last month it took book losses of $350 million on its Russian bonds, after the rouble was devalued and Moscow defaulted on its debt. Three weeks later, Nomura Holding America said it was expecting $275 million in losses for the half from commercial real estate subsidiary Capital America. Adding insult to injury for Nomura yesterday, Moody's Investors Service downgraded the brokerage to Baa1 from A3, its second downgrading in less than a day. Overnight, Fitch-IBCA had trimmed its rating to C/D from C. Nomura said it would inject an additional $1.2 billion into its troubled US unit, which has reeled from losses in its mortgage-backed bonds business and the Russian economic crisis. "The problem in Russia spread to the United States and we could not respond to the consequent credit spread," said Nomura director Kenichi Watanabe. "We gave too much autonomy to our overseas operations. From now on, we will concentrate business decision-making authority at our headquarters." Nomura and other companies are falling victim to Japan's corporate tradition of cross-shareholding. Declining prices have put pressure on companies to sell shares held to cement business ties. The domestic losses widened as Japan's benchmark stock index fell 19 per cent to a 12-year low during the period.