Japan Nikkei falls to 16-month low after Wall St

Tokyo, Nov 20: Japan's Nikkei share average tumbled to a 16-month low and the broader TOPIX index hit a two-year low on Tuesday, battered by a Wall Street tumble set off by renewed credit fears and worries about the health of the U.S. economy.

A faltering dollar and hefty sales of futures helped lead the Nikkei sharply lower from the start, with the benchmark average opening at its lowest level since July 2006 and then falling further.

Though shares were sold across the board, construction firms such as Kajima Corp were especially hard hit. Exporters and financial firms also suffered.

''The market appears to have found some temporary support around today's low, but this could change after the Hong Kong and Shanghai markets start trading, and the market will also watch movements of the dollar against the yen,'' said Masayoshi Okamoto, head of dealing at Jujiya Securities.

''It's a Black November.'' The Wall Street tumble was set off when Goldman Sachs recommended investors sell shares of Citigroup, saying the bank may have to write off $15 billion as mortgage losses reduce earnings.

Credit worries fanned by the Citigroup downgrade were compounded when the world's biggest reinsurer, Swiss Re, announced a $1.07 billion write-down.

''Technically, the market is oversold, which normally would lead to short-covering -- and probably will at some point today, too,'' said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities. ''But given how bad the whole environment now is, there's no reason to really buy strongly.'' At 0059 GMT the benchmark Nikkei was down 1.6 percent at 14,803.67. It earlier hit 14,757.22, the lowest since 14,560.67 hit on July 24, 2006.

The TOPIX index was down 2 percent at 1,428.18, its lowest since October 2005.

The dollar hovered near an 18-month low against the yen, slipping as low as 109.60 yen in early Tokyo trade, but it later edged back up towards 110 yen.

Exporters hit, banks battered: The strong yen took an inevitable toll on exporters, especially car firms, with Nissan Motor Co down 3.8 percent at 1,101 yen while Honda Motor slipped by 3.2 percent to 3,670 yen. Canon Inc fell 1.8 percent to 5,380 yen and Sony Corp slipped 1.7 percent to 5,230 yen. Bank shares were hit by concerns about mortgage losses.

Mitsubishi UFJ Financial Group Inc slid 3.8 percent to 911 yen and Mizuho Financial Group Inc fell 3.6 percent to 507,000 yen. Sumitomo Mitsui Financial Group Inc lost 3.8 percent to 760,000 yen.

Sumitomo Mitsui said on Monday it expected to post up to 87 billion yen ($790 million) in valuation losses on subprime-related investments in the current business year to March.

Construction firms suffered as well, with Kajima tumbling 6 percent to 296 yen and Kumagai Gumi down 4.4 percent to 129 yen.

Market participants said this appeared to be due to the growing bite on business by tighter construction rules.

A rare bright spot was Aozora Bank Ltd, which surged 7.5 percent to 344 yen after Aozora and Sumitomo Trust&Banking Co said they planned to form a business alliance but denied a newspaper report that they may eventually merge.

REUTERS
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