Nikkei nosedives to 19-year nadir

TOKYO - Tokyo's Nikkei average plunged to a 19-year low yesterday after banks and blue chips took a beating on worries over the dimming economic outlook in Japan and the United States.

The Nikkei finished 3.2 per cent lower at 9217.04, falling below the previous year-to-date closing low of 9420.85 marked in February. It was the lowest close since September 19, 1983.

The banking sector sub-index tumbled more than 5 per cent, the second-biggest loser after the brokerage index on the Tokyo Stock Exchange's first section, helping send the capital-weighted TOPIX index down 2.81 per cent to 904.24.

"Investors are losing hope and that's driving down stocks even further," said Shigeharu Shiraishi, a managing director at SG Yamaichi Asset Management. There is "a failure of the Government to provide any fresh measures to tackle the nation's financial and fiscal mess".

Among the hardest-hit stocks were Mizuho Holdings, Japan's biggest banking group, and its peers.

Japanese banks have large holdings of stocks in their portfolios, and falls in the market eat into their capital base, increasing worries about the nation's fragile financial system in the run-up to the end of the first half on September 30.

Mizuho sank 9.24 per cent to 226,000 ($4099) and second-ranked Sumitomo Mitsui Banking Corp slumped 7.95 per cent to 556.

"The market here seems to have started factoring in near-term risk of negative growth in Japan," said Toyomi Kusano, director and deputy branch manager at Credit Agricole Indosuez Securities.

Data on Friday showed that the Japanese economy grew at a faster-than-expected 0.5 per cent in the April-June quarter, but industrial production fell unexpectedly for the second straight month in July and other data showed deflation worsening.

Some analysts and investors said they were concerned that the Government did not have an effective plan to help banks before they close their books for the first-half earnings at the end of the month.

"Investors seem to have thrown in the towel," said Joji Maki, a senior director at Baring Asset Management (Japan). "Expectations the Government will fail to sustain the market and economic recovery is driving us lower."

Exporters such as Sony fell on concern a US industry report due today will show factory orders and production slowed in August.

Sony, which relies on the US for more than a quarter of its sales, dropped 1.8 per cent to 5010. Matsushita Electric Industrial, the world's biggest maker of electronics, which exports 35 per cent of its products, declined 4.4 per cent to 1350.

"Any US data will be scrutinised closely by all investors, and if exports were to deteriorate for Japan, it would hurt the economy," said Graeme Sinclair, who manages US$1 billion at Aberdeen Asset Management Asia.

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