ID :
11343
Thu, 07/03/2008 - 21:11
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http://m.oananews.org//node/11343
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FOCUS: Nikkei hit by longest losing streak in 43 yrs on global inflation risk
TOKYO, July 2 Kyodo - Japan's key Nikkei stock index on Wednesday marked its longest losing streak for 43 years as the specter of inflation risks causing a global recession struck hard at the Tokyo equity market, which is already suffering under the
weight of a U.S. credit turmoil.
The Nikkei now stands at the lower 13,000 mark, having shed a total of 1,166 points during the past 10 trading sessions in the most prolonged losing streak since February 1965 -- a period right after the Olympic Games in Tokyo when the nation faced a severe recession that battered its securities industry.
''This is the kind of market you'll see only once in 50 years,'' said Fumiyuki Nakanishi, chief equity strategist at SMBC Friend Securities Co., noting it was rare for troubles at U.S. financial institutions to have such a far-reaching global impact.
A series of recent analyst warnings of additional subprime-linked losses by financial giants like Merrill Lynch & Co. and Citigroup Inc. have certainly created a sense of deja vu following the worldwide financial market crisis from January to March, which culminated in J.P. Morgan Chase & Co.'s acquisition of Bear Stearns Cos. at fire-sale prices.
And while persistent fears of a U.S. credit squeeze remain a major drag, brokers said the current malaise plaguing the Tokyo market stemmed more from growing inflation risks, which have also hit its Asian counterparts hard.
''The Japanese market has already priced in a U.S. slowdown,'' said Masatoshi Sato, a senior strategist at Mizuho Investors Securities Co.
''But Japanese exports will face pressure if Asian stocks do not stop falling and if inflation leads to tightening (of monetary policy) and eventually to downward revisions of economic projections (in Asia),'' Sato said.
In the same 10-day period when the Nikkei slid over 8 percent, the benchmark stock indexes in China, South Korea and the Philippines have shed about 10 percent, 8 percent and 9 percent respectively.
Brokers said a drop in consumer spending among Asian countries will be a huge blow for Japan's export-oriented companies since they have tried to offset sluggish sales in the United States by shifting their focus to booming demand in Asia, which has escaped relatively unscathed from the U.S. subprime mortgage crisis.
And although Japan has boasted of having high energy efficiency as a bulwark against inflationary pressures, Japanese companies are starting to feel the pinch from steep rises in raw material prices.
''The rising concern that Japan will enter stagflation has led to recent equity declines,'' said Katsuhiko Kodama, a senior strategist at Toyo Securities Co., referring to the combined condition of an economic slowdown and inflation.
Kodama warned that Japanese companies may need to revise downward their earlier profit forecasts for the April-June quarter due to downside pressures from higher material costs.
Mizuho's Sato said uncertainty over the adverse impact of global inflation on the Japanese economy has caused the Nikkei index to crawl slowly downward over a longer period of time, in stark contrast to the dramatic falls seen earlier this year.
But he suggested the Nikkei may exit tight ranges and climb to as high as the 16,000 line once investors can confirm that the inflationary impact may not be as devastating as initially feared or if oil prices can drift back to normal levels.
Other brokers said Japanese stock markets still remain robust compared with those in the United States and Europe, with the Nikkei index standing nearly 13 percent higher from this year's low recorded March 17.
''Even with this 10-day losing streak, Japan is definitely not in a gloomy situation,'' said Seiichi Suzuki, a market analyst at Tokai Tokyo Securities Co., adding foreign investors have been aggressively snapping up Japanese shares in recent months.
''Share prices do not necessarily match economic fundamentals,'' Suzuki said, suggesting it was too early to conclude that budding inflationary pressures will trigger a global economic recession.
weight of a U.S. credit turmoil.
The Nikkei now stands at the lower 13,000 mark, having shed a total of 1,166 points during the past 10 trading sessions in the most prolonged losing streak since February 1965 -- a period right after the Olympic Games in Tokyo when the nation faced a severe recession that battered its securities industry.
''This is the kind of market you'll see only once in 50 years,'' said Fumiyuki Nakanishi, chief equity strategist at SMBC Friend Securities Co., noting it was rare for troubles at U.S. financial institutions to have such a far-reaching global impact.
A series of recent analyst warnings of additional subprime-linked losses by financial giants like Merrill Lynch & Co. and Citigroup Inc. have certainly created a sense of deja vu following the worldwide financial market crisis from January to March, which culminated in J.P. Morgan Chase & Co.'s acquisition of Bear Stearns Cos. at fire-sale prices.
And while persistent fears of a U.S. credit squeeze remain a major drag, brokers said the current malaise plaguing the Tokyo market stemmed more from growing inflation risks, which have also hit its Asian counterparts hard.
''The Japanese market has already priced in a U.S. slowdown,'' said Masatoshi Sato, a senior strategist at Mizuho Investors Securities Co.
''But Japanese exports will face pressure if Asian stocks do not stop falling and if inflation leads to tightening (of monetary policy) and eventually to downward revisions of economic projections (in Asia),'' Sato said.
In the same 10-day period when the Nikkei slid over 8 percent, the benchmark stock indexes in China, South Korea and the Philippines have shed about 10 percent, 8 percent and 9 percent respectively.
Brokers said a drop in consumer spending among Asian countries will be a huge blow for Japan's export-oriented companies since they have tried to offset sluggish sales in the United States by shifting their focus to booming demand in Asia, which has escaped relatively unscathed from the U.S. subprime mortgage crisis.
And although Japan has boasted of having high energy efficiency as a bulwark against inflationary pressures, Japanese companies are starting to feel the pinch from steep rises in raw material prices.
''The rising concern that Japan will enter stagflation has led to recent equity declines,'' said Katsuhiko Kodama, a senior strategist at Toyo Securities Co., referring to the combined condition of an economic slowdown and inflation.
Kodama warned that Japanese companies may need to revise downward their earlier profit forecasts for the April-June quarter due to downside pressures from higher material costs.
Mizuho's Sato said uncertainty over the adverse impact of global inflation on the Japanese economy has caused the Nikkei index to crawl slowly downward over a longer period of time, in stark contrast to the dramatic falls seen earlier this year.
But he suggested the Nikkei may exit tight ranges and climb to as high as the 16,000 line once investors can confirm that the inflationary impact may not be as devastating as initially feared or if oil prices can drift back to normal levels.
Other brokers said Japanese stock markets still remain robust compared with those in the United States and Europe, with the Nikkei index standing nearly 13 percent higher from this year's low recorded March 17.
''Even with this 10-day losing streak, Japan is definitely not in a gloomy situation,'' said Seiichi Suzuki, a market analyst at Tokai Tokyo Securities Co., adding foreign investors have been aggressively snapping up Japanese shares in recent months.
''Share prices do not necessarily match economic fundamentals,'' Suzuki said, suggesting it was too early to conclude that budding inflationary pressures will trigger a global economic recession.
