Japan market falls bigtime

[mayday]

Livedoor an internet company in Japan just made the I fund a looser today.

[Wizard]

Good thing Japan has a stop stock rule of a stock can not fall more than 14% in one day. A bunch of them fell 14% last night. Funny how they do not have a stock stop when it goes 14% rule.

[Rod]

The "stop stock" rule kicked into gear today, the 18th:

http://www.cnn.com/2006/BUSINESS/01/18/asiastocks.wednesday/index.html

I already placed a topic on the "day to day market talk". So you may find more comments there if you are reading this.

God Bless:cool:

[Ichiro]

I am glad that I got out of the I fund on 17 Jan 05. When I saw the Japanese government officals entering the Livedoor Main Office recently I knew that the Nikkei will drop substantially the next day. Here I am in Japan watching the Japanese securities news and they said that this slide in the Nikkei will continue for a few more days. There is a major panic among the new Japanese investors who are bailing out of the market at any cost. I guess the new investors did not realize that stocks may increase in price but there is always the risk that it will fall. As Tom said earlier the market needed a good reason for a major correction. I would not be surprised if the Nikkei drops another five percent. In a few days, once the market settles I will buy the I fund again.

[oldschool]

I'm wondering if you've heard any discussion on the news of margin accounts being sold out by the big brokerage houses? When that takes place, often the most high flying stocks are damaged the worst. Maybe because the last folks in to those stocks tend to be the least aware of risk - and also much to their suprise are entering near the riskiest moments. There was a news story out yesterday citing figures that the level of stock bought on margin in Japan had just reached the highest percentage level in 14 years.

[oldschool]

Here's a bit from a story talking about one of the factors affecting margin accounts at some Japanese brokerages today. Link below.

Taizo Nishimuro, TSE president, held a rapidly-convened briefing at lunchtime to inform the market that morning trading indicated the number of transactions was poised to exceed the exchange’s daily capacity of 4.5 million and that an early closure was a possibility.

This announcement triggered a rush of selling as investors desperately tried to close positions as soon as possible, pushing the number of transactions up to 4 million, at which point the TSE took the decision to order a trading halt at 2:40 pm. “The TSE announcement caused volume to spike and made an early closing a self fulfilling prophecy,” said one banker.

Dealers said the situation was not helped by the decision to suspend trading in Livedoor in the morning on the emergence of new allegations of financial impropriety, and then resume trading in the company in the afternoon, prompting many retail investors to dump the stock.

Their desire to offload their holdings was compounded by an announcement from a number of Japanese brokerages that Livedoor shares could no longer be used as collateral for margin trading, forcing investors to sell stocks across the board to meet possible margin calls.

http://www.business-standard.com/smartinvestor/storypage.php?chklogin=N&autono=212230&lselect=1&leftnm=lmnu6&leftindx=6

[oldschool]

Now, it doesn't seem like anyone is saying the fundamentals for Japanese companies have changed overnight - so all this may look like a short term digression a year from now. Painful to the I fund at the present though.

[bkrownd]

This announcement triggered a rush of selling as investors desperately tried to close positions as soon as possible


This is interesting, because it suggests prices are being artificially manipulated (depressed it would seem) by a factor other than their natural value.

IIRC Japanese people are gunshy on their native stocks after the 90's, creating more opportunity for the rest of us to jump in while the getting is good.

[Wizard]

This is interesting, because it suggests prices are being artificially manipulated (depressed it would seem) by a factor other than their natural value.

IIRC Japanese people are gunshy on their native stocks after the 90's, creating more opportunity for the rest of us to jump in while the getting is good.

Next we teach you how to snatch a pebble from our hands. :D

[oldschool]

Now there seems to have been a suicide by one of the executives at the firm under investigation. May make unraveling things a bit slower task?

[Rod]

I am glad that I got out of the I fund on 17 Jan 05. When I saw the Japanese government officals entering the Livedoor Main Office recently I knew that the Nikkei will drop substantially the next day. Here I am in Japan watching the Japanese securities news and they said that this slide in the Nikkei will continue for a few more days. There is a major panic among the new Japanese investors who are bailing out of the market at any cost. I guess the new investors did not realize that stocks may increase in price but there is always the risk that it will fall. As Tom said earlier the market needed a good reason for a major correction. I would not be surprised if the Nikkei drops another five percent. In a few days, once the market settles I will buy the I fund again.

It's UP over 2% for the 19th. So perhaps the "kneejerk" reaction is finished.

[Ichiro]

Last week, I saw on a Japanese TV that the novice investors in Japan are speculating quite a bit using margins to purchase stocks and especially foreign currencies. There are now young Japanese office workers or housewifes who trade foreign currencies via the net anytime of the day since the foreign currency market is open 24 hours. This type of trading increased quite substantially from last year since the value of the dollar has been weakening. It is a matter of time before the authories change the margin requirements which would slow down the speculation of financial investments.

[Ichiro]

From Money news-21 Jan 06. Livedoors Inc stole the headlines. Apparently the proliferation of sell orders from hyperactive day traders-who can use margin accounts to super-size their short sales-was enough to flood the Tokyo Stock exchange.

[Ichiro]

Well, folks, the Japanese Market was down 2.12% today and it is also dragged down the other asian markets as well. It will probably be down the whole week since the President of Livedoor will be questioned by the authorities this week. This will be very negative for the Japanese stock market but it will be good for the market in the long run. The Japanese media sure makes the Livedoor issue worst than it is which is causing a major panic in the Japanese stock market. I am just glad that I made most of my $$$ over the past 20 years by investing through the dividend reinvestment program of conservative US companies..

[tsptalk]

Thanks for the insight on the Asian markets Ichiro!

Tom

[roguewave]

Well, folks, the Japanese Market was down 2.12% today and it is also dragged down the other asian markets as well. It will probably be down the whole week since the President of Livedoor will be questioned by the authorities this week. This will be very negative for the Japanese stock market but it will be good for the market in the long run. The Japanese media sure makes the Livedoor issue worst than it is which is causing a major panic in the Japanese stock market. I am just glad that I made most of my $$$ over the past 20 years by investing through the dividend reinvestment program of conservative US companies..



Don't fall for the Livedoor kennard, 90% of Japan's oil is imported from the Middle East. The uncertainty about Iran and this entire region is roiling the Japanese equity markets. If but for a short time Japan is cut off from obtaining oil guess what happens to its largest banks much less the Nikkei.

[Soldat]

Balls to the walls, the nikkei is steaming 1.4%. Dollar opens high vs. Y and E.

[The_Technician]

The outlook is S&P and EAF doing well.....as well as anybody else invested in overseas....

http://www.usatoday.com/money/markets/us/2006-01-20-global-earnings-usat_x.htm?csp=N009

[Ichiro]

Folks load up on the I fund due to: TOKYO (Nikkei)--After seeing its brand name continue to weaken, the Sony Corp. (6758) group now projects a net profit instead of a loss this fiscal year largely due to the recovery of its electronics segment.

The net profit projection by sony and because of the positive exchange rate (Y116 to the US dollar) will increase the Nikkei in the next few days. Also, the the Livedoor panic is not having much impact on the Nikkei these days.

[Ichiro]

Mainichi Daily---Japanese stocks jump 3.6 percent, wiping out last week's plunge.

Japan's benchmark stock index surged to a fresh five-year high Friday, reclaiming all of its losses last week, as investors snapped up stocks on upbeat earnings from Sony and others.

The Nikkei 225 index climbed 569.66 points, or 3.58 percent, to 16,460.68 on the Tokyo Stock Exchange -- its highest closing since Sept. 8, 2000.

It was the biggest percentage gain for the Nikkei since Oct. 15, 2002.

The surge brings the index back above where it was before Jan. 16, when prosecutors raided Internet startup Livedoor Co., provoking a big sell-off. The market has recovered since the company's head, Takafumi Horie, was arrested Monday evening.

Shares of Sony surged 14.2 percent on the back of better-than-expected earnings that suggested a budding recovery at the Japanese company thanks to booming flat-panel TV sales. Sony's stock finished at 5,800 yen ($50).

"The biggest factor boosting investor sentiment was Sony," said Ryuta Otsuka, a strategist at Toyo Securities. "Everyone likes the story of a company coming back (from bad times), and it was Sony, after all."

Sony said its net profit rose 17.5 percent in the fourth quarter, and raised its profit forecast to 70 billion yen ($602 million) from a previous estimate of a 10 billion yen ($86 million) net loss.

Investors were also heartened by signs that Japan's economy may be emerging from an extended period of deflation, when prices sink, hurting earnings and wages. The government announced that the nationwide core consumer price index rose 0.1 percent in December from a year earlier, the first time in almost eight years that the index has gained for two months straight.

Friday's rally was broad, with gains in technology, retail and banking and insurance. Gainers included semiconductor testing device maker Advantest Corp., which climbed 9.80 percent to 14,000 yen ($120.69).

Seven & I Holdings Co. -- the parent company of retailers like Ito-Yokado, jumped 4.13 percent to 5,040 yen ($43.45).

Other companies that gained on positive earnings reports included Nikko Cordial Corp. -- one of Japan's top securities brokerages -- which rose 3.15 percent to 1,836 yen ($15.83). Video-game maker Nintendo jumped 2.51 percent to 16,720 yen ($144.14).

Major insurance company Millea Holdings Inc. rose 4.91 percent to 2.14 million yen ($18,448.28) and Mitsui Sumitomo Insurance Co. gained 3.64 percent to 1,422 yen ($12.26).

The broader Topix index of all shares on the exchange's first section rose 47.03 points, or 3.27 percent, to 1,690.32. On Thursday, the Topix rose 24.83 points, or 1.53 percent.

Shares in Livedoor climbed 23 percent to finish at 139 yen ($1.20), recouping some of the losses from its tumble, a sign the Japanese market may be finally overcoming the jitters that followed the Jan. 16 raid.

First-section volume rose to 2.426 billion shares from Thursday's 2.037 billion shares. Advancers beat decliners 1,451 to 175, while 41 issues were unchanged.

In currency trading, the dollar bought 116.28 yen on the Tokyo foreign exchange market at 5 p.m. (0800 GMT) Friday, down 0.07 yen from late Thursday in New York. The euro fell to $1.2208 from $1.2216 late Thursday.

The yield on the 10-year Japanese government bond rose to 1.5400 percent from Thursday's finish of 1.5050 percent. Its price fell 0.30 point to 98.79. (AP)

[Ichiro]

From Mainichi Dialy:

Livedoor shares recoup losses as Japanese stock market rallies

Shares in troubled Japanese Internet company Livedoor rose 23 percent in Tokyo trading Friday, recouping some of the losses from its tumble after a surprise raid by criminal investigators nearly two weeks ago.

The recovery in Livedoor shares, which finished at 139 yen ($1.20), was a sign the Japanese market may be finally calming down from the jitters that followed the Jan. 16 raid and Monday's arrest of Takafumi Horie, Livedoor's former president. Still, the shares are down 80 percent from their levels prior to the raid.

The benchmark for Tokyo stocks rallied to a five-year high Friday, gaining nearly 4 percent to finish at 16,460.68 points -- the Nikkei's highest closing since Sept. 8, 2000 -- helped by better-than-expected earnings results from Sony Corp.

Prosecutors suspect Horie and three other Livedoor executives of giving false information about subsidiaries and covering up losses.

The arrest is a stunning fall for 33-year-old Horie, who had become a celebrity in Japan for his bold buyout attempts and had come to symbolize the possible new face of corporate Japan.

Horie, who now sits in a cell at the Tokyo Detention Center, has repeatedly said he is innocent.

Livedoor, which runs an Internet portal and grew through aggressively buying up other businesses, was a new kind of company for Japan, where manufacturers like Sony ruled the business world for decades.

Trading in Livedoor shares has been limited to an hour for the last two sessions and had been shortened to 90 minutes Wednesday to prevent confusion on the Tokyo Stock Exchange. The bourse has been repeatedly plagued by problems dealing with surging trading volumes.

One of Horie's grow-rich tactics, now under scrutiny, was repeatedly splitting stocks in Livedoor and its subsidiaries. The move boosted the number of shareholders to an unusually numerous 220,000 people and is making trading volume in Livedoor shares massive recently, as people try to dump the shares. Friday's Livedoor trading volume totaled 106 million shares.

Kozo Hiramatsu, who replaced Horie as president at Livedoor this week, met with top executives at Fuji Television Network Inc. Friday, Fuji official Ken Mishima said, while refusing to elaborate. Fuji TV owns 12.7 percent of Livedoor under an agreement Fuji signed reluctantly last year after Horie tried to take over the media conglomerate.

Hiramatsu, who headed a software company that was bought out by Livedoor, is viewed as relatively untainted by the scandal. He has promised to turn Livedoor around and has said Horie will never return to Livedoor. Fuji TV Chairman Hisashi Hieda has said he is considering various options including "supporting" Livedoor, without giving specifics.

Hiramatsu told nationally televised news on NHK TV that he is asking Fuji TV to continue a partnership, and Japanese media reports said Hiramatsu is asking Fuji TV to keep its stake in Livedoor.

There has been some speculation investment funds may take over Livedoor if it declines enough to become a bargain. But others say takers are likely few for a company under criminal investigation for allegedly padding its books.

The scandal has prompted analysts and members of the public to say Japan needs clearer laws and heavier penalties overseeing securities.

Calls have been growing louder for setting up a Japanese equivalent of the U.S. Securities and Exchange Commission. Japan's markets, which lack an independent securities watchdog, are monitored by a unit in the government Financial Services Agency many say lacks authority and resources.

Doubts are growing about the monitoring system over white-collar crime as Livedoor's alleged dubious actions appear to have gone unchecked for years. (AP)

January 27, 2006

[Ichiro]

Japan may be close to beating deflation.

From Mainichi Daily:


Key indicator for Japan prices rises for second straight month

A key indicator for Japanese prices rose for the second straight month in December, suggesting that Japan may be close to beating deflation.

Data released Friday for the nationwide core consumer price index, which excludes the effect of volatile fresh food prices, rose 0.1 percent on year in December, marking the first two-month run of price rises in almost eight years.

The number matched forecasts given by economists surveyed by Dow Jones Newswires. The index had gained 0.1 percent in November, according to ministry data.

Japan has been fighting deflation -- a situation in which prices slide continuously and hurt growth -- deadening economic activity by bringing down wages and corporate profits.

If Japan succeeds in beating deflation, the Bank of Japan is increasingly likely to end its five-year policy of flooding the financial market with extra money to encourage recovery.

But government officials warned Friday that the reading doesn't necessarily mean deflation is over.

"We need to look at the various price figures in judging the end of deflation," Finance Minister Sadakazu Tanigaki told reporters. "So I stick to the view that the country is still in mild deflation."

Shinzo Abe, the government's chief spokesman, also urged caution, saying the Bank of Japan still needs to work with the government to beat deflation.

Japan has been showing signs of economic recovery in recent years after stagnation that lasted for more than a decade. Corporate profits are improving, paychecks are growing moderately and the rise in unemployment has stabilized.

The Bank of Japan has kept interest rates at zero for five years. Japanese officials are worried about tightening monetary policy too early because of Japan is still fighting deflation.

Bank of Japan Gov. Yoshihiko Fukui has indicated that monetary policy may be changed if year-on-year changes in the core consumer price index, which measures inflation, are stable above zero, but views at the central bank have been mixed as to when deflation can be safely viewed as over. (AP)

January 27, 2006