June 6, 2011 / 7:39 AM / 9 years ago

Nikkei breaks below months-old range, Tepco woes worsen

 * Nikkei falls below key support at 9,400
 * Risk of further losses, possibly to 8,800
 * Exporters hurt after weak U.S. job data raises doubts on
growth
 * Tepco nosedives, TSE head quoted as favouring court-led
rehabilitation
 * Tepco worries drag down banking shares, other utilities
 By Hideyuki Sano	
 TOKYO, June 6 (Reuters) - The Nikkei average closed at an
11-week low on Monday as speculation that Tokyo Electric Power
Co could enter court-led restructuring pummelled its
shares and fanned bearish sentiment that set in after soft U.S.
data.	
 The Nikkei's break below key support highlighted the risk of
further falls in the near term, with investors also fretting
about slower global growth.	
 The Nikkei fell 1.2 percent to 9,380.35, breaking
below its 9,400-10,000 range of the past two months, while the
broader Topix declined 1.1 percent to 807.99, its lowest
finish since mid-March. 	
 With the Nikkei's well-worn range broken it may now move
into a new 600-point range with 9,400 as resistance, said Eiji
Kinouchi, chief technical analyst at Daiwa Securities Capital
Markets.	
 "The Nikkei could fall to around 8,800 before it starts
recovering in late June," Kinouchi said, with the yen likely to
start weakening around that time. He said the yen has started to
weaken about three months after hitting a peak in the wake of
three major events -- previous major earthquakes in Japan in
1995 and 1923, and the 2008 financial crisis.	
 Tokyo Electric, known as Tepco, closed down 27.6 percent at
207 yen. At one point it fell by its daily limit to a record low
of 206 yen, just 2 percent of its peak in 1987, after the head
of the Tokyo Stock Exchange, Atsushi Saito, was quoted as saying
the troubled nuclear operator should go through a court-led
restructuring. ID:nL3E7H605M]	
 A bourse spokesman said Saito's comment was only his
personal opinion, but the remark rekindled worries that the
company's shares could be delisted and its shareholders made to
shoulder losses and have their equity wiped out.	
 The government has promised to help Tepco handle
compensation claims by thousands of households and businesses
forced to evacuate due to radiation from its Fukushima nuclear
plant, where reactor cooling systems were knocked out by the
March 11 earthquake and tsunami, but doubts about the plan
remain with Prime Minister Naoto Kan under pressure to resign.	
 "The market is pricing in the risk of a Tepco bankruptcy,"
said a fund manager at a Japanese asset management firm. It's
clear that Tepco's capital is not enough to cover the damage
claims. It can pay if it can raises electricity charges, but
that seems difficult in the current political climate."	
 Banking shares led the losses, with their subindex falling
1.8 percent as investors worry that banks may have to
shoulder bigger losses on loans the Tepco if it goes under.	
 Among banking stocks, Mitsubishi UFJ Financial Group
 fell 3 percent to 359 yen, Sumitomo Mitsui Financial
Group dropped 1.9 percent to 2,269 yen and Mizuho
Financial Group shed 0.8 percent to 121 yen.	
 Bank shares have been suffering since last month after Chief
Cabinet Secretary Yukio Edano said the public would not accept
government financial support for Tepco unless its banks waived
some pre-quake loan terms.	
 The fall in Tepco shares also hit other utilities, with
investors seeing a risk that Kansai Electric Power and
other utilities may be asked to help in the Tepco compensation
scheme.	
 This played out against the backdrop of growing worries that
the global economy is losing traction 	
 A U.S. payrolls report on Friday showed only 54,000 jobs
were added in May, the weakest reading since September, while
the unemployment rate rose to 9.1 percent from 9 percent in
April. [ID:nOAT004818]	
 Fears of slower growth helped to drive down exporters'
shares, with Komatsu Ltd , the world's No.2 construction
machinery maker, falling 2.1 percent to a near-three-month low.
Shares in Sony Corp , hit by hacker attacks on its
networks, fell 3.2 percent to a two-year low. 	
 Volume was steady with 1.9 billion shares changing hands on
the main board, in line with the last week's volume.   
Underscoring the bearish mood in Tokyo the number of declining
shares exceeded 1,000. Decliners outpaced advancing shares by
1,127 to 442.	
	
 (Additional reporting by Ayai Tomisawa; Editing by Michael
Watson)	
 
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