Nikkei hammered by hedge funds, drops 10.6%

By Reuters
Posted March 15 at 6:22 a.m.

Japan’s Nikkei share average plunged 10.6 percent on Tuesday, posting the worst two-day rout since 1987, as hedge funds bailed out after reports of rising radiation near Tokyo. Many mutual funds were left on the sidelines, leaving them poised to dump shares into any rebound.

The yen tripped on talk of intervention by authorities trying to contain the economic impact from last week’s devastating earthquake and tsunami, but then recovered. Government bond yields rose as investors sold debt to offset stock market losses.

The scale and speed of the equity selloff forced domestic fund managers to sit on the sidelines as market volumes surged to a record for a second day running.

“Even if we wanted to sell today there was very little we could do,” said a manager at a Japanese fund, asking not to be named because he was not authorised to speak to the media.

“We didn’t sell and waited, sidelined because hedge funds were just dumping stocks in panic.”

At one point, the Nikkei had plunged 14 percent after Prime Minister Naoto Kan said the risk of nuclear contamination was rising at the Fukushima Daiichi complex on Japan’s quake ravaged northeastern coast, 150 miles north of Tokyo. The French embassy said low-level radiation could hit Tokyo within hours.

Local reports of radiation rising in communities near Tokyo only stoked the sense of panic.

In contrast to Monday’s trading, when construction stocks rose in anticipation of revenue from rebuilding contracts, none of the 225 constituents of the benchmark Nikkei average gained on Tuesday. Shares of construction company Kajima Corp. slid 13 percent, a day after its shares surged.

The broad TOPIX index of Japanese stocks has shed 16.3 percent this week, the worst two-day losing streak since the global equity crash of October 1987.

“All focus is on the nuclear crisis,” said Hideyuki Ishiguro, a supervisor at Okasan Securities in Tokyo. “Foreign investors and domestic fund operators are pulling out from Japanese shares.”

Read more about the topics in this post: , , , ,

Comments are closed.