Markets spiral downward as threat of radiation rises
Fears of a nuclear crisis in Japan hammered stock markets around the world yesterday, rapidly turning relative calmness the day before into full-blown panic.
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By MICHELLE QUAH
16 March 2011
Fears of a nuclear crisis in Japan hammered stock markets around the world yesterday, rapidly turning relative calmness the day before into full-blown panic.
Yet, even amidst the pandemonium, analysts were drawing attention to buying opportunities - calls which are no doubt largely being unheeded by most investors at this stage.
Japanese markets were unsurprisingly the hardest hit yesterday by radiation fears - and the hysteria quickly spread to the rest of Asia.
Japan’s Nikkei 225 tumbled more than 14 per cent, before shaving losses to close 10.6 per cent down, at 8,605.15 - the lowest in nearly two years. Of the 225 shares in the index, none gained, 224 declined and one was unchanged.
The broader Tokyo Stock Price Index (Topix) also fell as much as 14 per cent earlier in the day, before ending 9.5 per cent lower. That brings its total losses over two days to 16 per cent - its biggest two-day loss since the Oct 1987 market crash - and the value lost over three days to a massive US$700 billion.
Shares of Tokyo Electric Power (Tepco), which fell 24 per cent on Monday, failed to even open for trading - thanks to zero buy orders. The company’s Fukushima Daiichi nuclear plant, north of Tokyo, was its third to explode. It closed limit-down, for the second straight session.
Toshiba, which also makes nuclear power plants, also closed limit-down - shedding 19 per cent - while Tohoku Electric, which owns several nuclear sites, also finished limit-down with a 20 per cent loss.
‘What the world is watching right now is whether Tepco’s Fukushima nuclear power plant is going to turn into Chernobyl,’ Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, told Dow Jones yesterday.
The fears were compounded by Japanese Prime Minister Naoto Kan who warned of a high risk of elevated levels of radiation.
Such fears negated the positive effects of the eight trillion yen (S$126.2 billion) which the Japanese central bank injected yesterday to provide liquidity and stability to financial markets, just a day after it pumped in 15 trillion yen for the same effect.
Bank stocks stumbled as investors worried that further weakness in equities could lead to a serious capital squeeze for banks. Mizuho Financial Group fell 10 per cent.
Shogo Maeda, head of Japanese Equities at Schroders, said in a report sent to BT: ‘The Japanese people have experienced many earthquakes and the associated consequences before (including the problems in nuclear power plants), but the magnitude has never been this big.’
In Singapore, the benchmark Straits Times Index finished almost 3 per cent down, at 2,946.08 - its lowest level since August last year.
Shares of property companies and real estate investment trusts with exposure to Japan remained under pressure, despite some of them downplaying the risk. Saizen Reit and Global Logistic Properties, both of which have assets in Japan, finished 7 per cent and 3 per cent lower, respectively.
Hong Kong’s Hang Seng Index shed 2.9 per cent, while South Korea’s Kospi fell 2.4 per cent, and Shanghai’s Composite Index closed 1.4 per cent lower.
European markets also trended lower in early trade, with the Stoxx 50 (Europe’s blue-chip index) down 3.4 per cent, London’s FTSE 100 down 2.2 per cent and the German Dax down almost 4 per cent, at 8pm (Singapore time).
Stocks of power companies were the hardest hit - though those of clean energy companies rose - as investors bet that regulators would scale back plans to build reactors worldwide.
‘We’re still heavily depressed by developments in Japan,’ Michael Koehler, head of strategy at Germany’s Landesbank Baden-Wuerttemberg, told Bloomberg. ‘As long as we don’t find a solution for power plants, equity markets won’t be rising.’
Tey Tze Ming, a market strategist at Saxo Capital Markets, told Reuters: ‘(The market meltdown is) definitely a knee-jerk reaction. There’s no macrodata to show why the world would suddenly stall its growth just because of the earthquake. I think it’s a very good buying opportunity for the long term.’
And Uwe Parpart, chief economist and Asia strategist at Cantor Fitzgerald, said: ‘How many times in a lifetime do you see a major market drop nearly 20 per cent in two days? Professional investors should and will look at buying opportunities at this point.’