Company News

Nikkei at 6-wk closing low amid capital-raising rush

* Nikkei hits 6-week closing low, Topix at 6-mth closing low

* JAL falls below 100, lowest since 2002 re-listing

* Fund-raising worries weigh market

* MUFG H1 profit rises, to raise $11.2 billion

Japan Airlines Corp's 9205.T stock tumbled to its lowest level since the firm's 2002 re-listing after the nation's transport minister declined to rule out a court-led bankruptcy for the troubled airline. [ID:nT199640]

After the close, Mitsubishi UFJ Financial Group 8306.T posted a 59 percent rise in quarterly profit helped by stronger lending and said it will raise up to 1 trillion yen ($11.2 billion) by issuing new shares, as Japan's biggest bank aims to meet tougher global capital requirements. [ID:nT211831]

The 1 trillion yen share issue is a record for a Japanese financial firm and is Japan’s biggest fundraising in at least nine years.

“Investor sentiment is pretty bad right now, it seems there is no end to negative factors,” said Noritsugu Hirakawa, a strategist at Okasan Securities.

“We have the strong yen, fund-raising worries, political uncertainty, concern about banks, and JAL.”

The benchmark Nikkei .N225 lost 53.13 points to 9,676.80, its lowest close since Oct. 5.

The broader Topix .TOPX lost 0.8 percent to 850.06, its lowest close since May.

Analysts said support for the Nikkei was likely around 9,628, the Nikkei’s October low, and then around 9,500.

In addition, the Nikkei’s 14-day RSI -- relative strength index -- has fallen to 27, well beyond the level of 30 that suggests that the asset may be oversold.

But market players have also said that the 9,500 mark is also dicey, as there are a number of put options, which give the owner the right to sell, around that level.

“Small cap shares have tumbled and the mood is not good. If overseas shares were to drop, there could be a steep fall,” said Kiyoshi Noda, chief fund manager for MU Investments.


Real estate firms were amongst the biggest losers, with the property subindex falling 4.9 percent .IRLTY.T. Tokyo Tatemono Co 8804.T slid 16.5 percent to 323 yen on plans to raise as much as $512 millionin a global share offering to repay debt and fund new investments. [ID:nT208866]

Japanese companies have already raised $40 billion through issuing common stock and convertible bonds this year, tapping a share market rebound for much-needed cash after the financial crisis -- but at the same time heavily diluting the holdings of their current shareholders. [ID:nT141402]

The flurry of capital-raising and market expectations for more is one reason why Japanese shares have been left behind in this year’s rally in global equities, market players say.

MUFG lost 0.6 percent to 484 yen, No. 3 bank Sumitomo Mitsui Financial Group 8316.T shed 5.9 percent to 2,850 yen and Mizuho Financial Group 8411.T fell 2.4 percent to 166 yen.

Also adding to market woes are ever-present fiscal concerns.

The Democrat-led government, which took office in mid-September, is caught between a rock and a hard place in its economic management, and market players have expressed concern about a perceived lack of direction in its policies.

Bond yields have risen this month as investors become increasingly worried about a surge in issuance as tax revenues slide. But at the same time, government stimulus is driving economic growth so a cut in state spending could send the economy back into recession amid talk of a renewed risk of deflation.

JAL, which fell as low as 94 yen -- a loss of 7.8 percent -- pared losses to 3.9 percent or 98 yen. The drop came despite a report that private equity firm TPG may invest as much as $1.1 billion.

Trade was active, with 2.3 billion shares changing hands on the Tokyo exchange’s first section compared with last week’s daily average of 1.7 billion.

Declining shares outnumbered advancing ones by nearly 2 to 1. (Additional reporting by Masayuki Kitano; Editing by Edwina Gibbs and Joseph Radford)