Japanese stocks on Friday tumbled to their lowest since the post-quake rout in March as investors ran for exits after the worsening financial crisis in Europe compounded anxiety over a weak US economy that has come close to stalling. Retail investors and foreigners were spotted offloading aggressively, but institutional players were not completely liquidating their positions, instead continuing to slash riskier bets and protect their portfolios.
While 32 of 33 subsectors on the Topix were lower, fund managers shifted into retailers and other domestic demand related shares, selling commodity stocks including oil refiners and trading houses, which were pummelled as US crude prices dropped sharply. "This is not only about some bad data from the US economy - look how Italian and Spanish CDS spreads have widened overnight - that's what's really pushing the market down," said Takashi Aoki, a senior fund manager at Mizuho Asset Management.
Aoki added that Friday's sell-off was exacerbated by some contract-termination related to selling by hedge funds. The benchmark Nikkei average fell 3.7 percent to 9,305.04, while the broader Topix dropped 3.3 percent to 809.32. The Nikkei hovered around its support at 9,300, where the index stood for some time after a slide that followed the March 11 earthquake and tsunami. Soon after the open it hit an intraday low of 9,264.09.
For the week, the index shed 5.4 percent. Analysts at brokerage CLSA said that below chart support at 9,300, major support is seen in the 8,800-8,900 area. A sharp fall through this level would open the door for a test of the next support level at 7,800, analysts said. The broader Topix fell below the 800 mark for the first time since March 17, at one point dropping as far as 794.16. The Dow and the S&P tumbled more than 4 percent on Thursday and the Nasdaq lost 5 percent on fears that the United States is facing another recession and that Europe's sovereign debt crisis is swallowing two of its largest economies.
Japanese Finance Minister Yoshihiko Noda on Friday repeated that he was closely watching yen moves, signalling Tokyo's readiness to continue with its yen-selling intervention that media said reached a record 4 trillion yen ($50.6 billion). Trading volume was brisk amid the worst sell-off since the March quake, reaching 2.5 billion shares on the main board, the highest since May 13. Last week's average daily volume was 1.7 billion shares. Underscoring the bearish sentiment, as many as 1,576 shares declined, while only 69 shares, or just 4 percent of those listed on the first section, advanced.