July 8, 2015 / 7:15 AM / 4 years ago

Japanese stocks fall the most in over a year as China rout takes toll

* Nikkei, Topix fall over 3 pct, biggest fall since early
    * Trading volume surges both in cash and futures market
    * Construction equipment makers, trading houses fall sharply

    By Hideyuki Sano
    TOKYO, July 8 (Reuters) - Japanese stocks tumbled on
Wednesday in their biggest drop in more than a year, as fears
grew that a relentless selloff in Chinese shares could ripple
through its economy and hurt Japanese companies exposed to the
Asian giant.
    Construction equipment makers Komatsu Ltd and
Hitachi Construction Machinery, which derive sizable
revenues from their China operations, skidded 5.8 percent and
4.0 percent, respectively.
    The Nikkei average fell 3.1 percent, its biggest
fall since March last year, to a seven-week low of 19,737.64
while the broader Topix shed 3.3 percent, its largest
decline in almost a year and a half.
    The Topix fell to a two-month closing low of 1,582.48, with
turnover hitting 3.39 trillion yen, about 45 percent above the
average in the past year. 
    Trading volume in the Nikkei futures front-month contract
 hit the highest level in almost six months. 
    The selling frenzy was sparked by yet another plunge in
Chinese shares, which have lost more than a third of their value
in just one month despite stepped-up emergency support measures
from Beijing. 
    Investors worry that market rout could deliver a fresh blow
to an already slowing Chinese economy. 
    "Today is a 'China day'. This is going to affect the real
economy. Chinese people who had made fortunes on stocks should
have been spending a lot but that is likely to change," said
Seiki Orimi, senior investment strategist at Mitsubishi UFJ
Morgan Stanley Securities.
    As concerns about Chinese economy hit commodity prices,
trading houses, which have big commodities business, also
    Sumitomo Corp fell 5.2 percent while Mitsubishi
Corp 3.7 percent. 
    "The ripple effect from the market correction (in China's
economy) has yet to show up," wrote Bank of America Merrill
Lynch analysts in a note. "We expect slower growth, poorer
corporate earnings, and a higher risk of a financial crisis."
    Itochu Corp fell 9.2 percent, taking an extra hit
from a Nikkei business daily article that its plan to buy a
stake in Bosideng International Holdings was rejected
by the Chinese apparel company's shareholders.
    Other casualties included tourism-related shares, which have
benefited from shopping sprees by a surging number of Chinese
tourists visiting Japan. Department store operator Isetan
Mitsukoshi fell 3.9 percent. 
   Some analysts said the latest fall in the Nikkei could
attract long-term investors as the benchmark is now trading
below 16 times expected profits - relatively inexpensive levels
- for the first time since February. 

 (Additional reporting by Ayai Tomisawa, Joshua Hunt and Tomo
Uetake; Editing by Kim Coghill & Shri Navaratnam)
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