Japanese stocks suffered deep losses Monday on the yen’s strength and further profit-taking after concerns about a rise in bond-market volatility helped stoke extreme swings late last week.
The Nikkei Stock Average tumbled 3.2% to 14,142.65, falling significantly more than the 0.9% it picked up after Friday’s roller-coaster ride. The broader Topix plummeted 3.4% to 1,154.07.
Still, both benchmarks had recovered from lows earlier in the day, when the Nikkei Average sank as much as 4%.
“The sharp rise in Japanese equities this year has been matched by the pace of the fall in recent days, with the relative strength of the yen again having a dramatic impact on the performance of Japanese exporters,” said Tim Waterer, a senior trader at CMC Markets. “The Nikkei will likely remain under pressure in the short term with offshore investors pulling funds amid the current yen unpredictability,” he added.
Exporters paced the losses in Tokyo as the U.S. dollar briefly dipped below ¥101 in early trade, raising worries about the impact on competitiveness and repatriated earnings from a stronger local currency.
Sony Corp. lost 6.3%, Sharp Corp. fell 5.3%, Fuji Heavy Industries Ltd. tumbled 7.6% and Toyota Motor Corp. skidded 5%.
“Many of the foreign investors who have poured almost $80 billion into Japanese equities this year have hedged the currency risk by selling the yen. However, given the slide in Japanese share prices, they may be over-hedged. To reduce the hedge, yen needs to be bought,” said Brown Brothers Harriman global head of currency strategy Marc Chandler.
Concerns surrounding bond-market volatility weighed on financials, which hold substantial amounts of Japanese government bonds (JGBs). Mizuho Financial Group Inc. slumped 4.3% and Mitsubishi UFJ Financial Group Inc. declined 2.9%, while Dai-ichi Life Insurance Co. slid 6.1%.
The drop came even as the yield on the benchmark 10-year JGB dropped 3 basis points in Monday’s trade to 0.83%, according to FactSet data.
Bank of Japan Gov. Haruhiko Kuroda was reported as saying over the weekend that moves in the asset markets don’t reflect excessively bullish expectations.
Elsewhere in Asia, Australia’s S&P/ASX 200 shed 0.4%, while Taiwan’s Taiex climbed 0.9% and South Korea’s Kospi rose 0.5%.
Meanwhile, Hong Kong’s Hang Seng Index inched up 0.1%, overcoming early declines, while the Shanghai Composite was also up 0.1%.
The losses in Sydney came as high dividend-yielding stocks, such as banks, suffered further selling amid the Australian dollar’s weakness against the U.S. currency.
A weakening Australian dollar makes the relatively high dividends paid by local firms less attractive to foreign investors.
“If the [Australian] dollar does fall back to 90 [U.S.] cents, as it appears to be, international clients will start to lose out on the differentials. … Losing out in the currency pairs would see the shine in the trade tarnished,” said IG Markets strategist Evan Lucas.
Shares of Commonwealth Bank of Australia gave up 0.8%, Bank of Queensland Ltd. lost 1.3% and gaming major Tatts Group Ltd. dropped 1.2%.
Miners also weakened amid lingering worries over China’s economic growth. Iron-ore producer Fortescue Metals Group Ltd. skidded 3.4%, and diversified miner Rio Tinto Ltd. lost 2.3%.
Stock in some South Korean exporters rose, meanwhile, amid expectations that a strengthened yen would improve their competitiveness at the cost of their Japanese rivals.
Kia Motors Corp. gained 1.4%, and Hyundai Motor Co. added 2%.
Marketwatch
