Tokyo: Japanese share prices closed down 2.22% Thursday to a more than three-year low on escalating fears that the global credit crisis will sink more financial titans in US and Europe, dealers said.
Asia’s largest bourse was rattled by jitters that Morgan Stanley was the next in line amid reports it was in talks to find a buyer, seeking to escape the fate of collapsed Lehman Brothers.
The Tokyo Stock Exchange’s benchmark Nikkei-225 index closed down 260.49 points to 11,489.30, rebounding from earlier lows, but still its lowest close since 27 June, 2005.
The broader Topix index of all first-section shares fell 23.75 points or 2.12% to 1,097.68, sliding below the symbolic 1,100-point level.
Market psychology now has “people starting to mention names that they have never had grudges against and that is quite dangerous,” Kitco gold analyst Jon Nadler told Dow Jones Newswires.
The Wall Street Journal reported that Morgan Stanley has held preliminary merger talks with Wachovia and at least one other bank, while CNBC reported that Morgan Stanley was also in talks to sell itself to China’s CITIC.
The Journal also reported that Washington Mutual was preparing to sell itself, with Wells Fargo and Citigroup as possible suitors.
Japanese banking shares plummeted on concern that the banking sector here may not be as insulated from the credit crisis as widely stated.
Credit Suisse analyst Shinichi Ina said in a report that Japanese regional banks have bond exposures to Lehman that are “relatively large” compared with their earnings.
While it remained unclear how much of the loans could be recovered amid rising credit costs, Lehman’s collapse “could be rubbing salt into the wounds for the regional bank sector,” Ina said.
British bank Lloyds TSB announced on Thursday it was taking over distressed rival Halifax Bank of Scotland (HBOS) in a £12.2 billion ($22 billion) deal.
The shared deal comes a day after the US government purchased nearly 80% of the world’s largest insurer American International Group (AIG) in exchange for an $85 billion loan.