Singapore: The Nikkei 225 Stock Average slipped below the 20,000 level and was headed for bear market territory in the latest blow for Japanese equities experiencing their worst December on record. The Nikkei 225 fell 4.2 percent to 19,310.90 in Tokyo as of 10 a.m. Tuesday, the first time the blue-chip stock gauge has traded below 20,000 since September 2017. The measure was down over 20 percent from a high on Oct. 2, heading for a bear market just days after the broader Topix index tumbled to that distinction. Japanese markets were shut Monday for a public holiday.
The S&P 500 plunged almost 3 percent to close at a 20-month low after news over the weekend that Treasury Secretary Steven Mnuchin called top executives from the six largest U.S. banks to discuss liquidity and a Bloomberg News report that President Donald Trump inquired about firing Fed Chairman Jerome Powell.
“The Trump bubble, which has brought gains in U.S. stocks and the dollar, is collapsing," said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo. “The more stocks fall, the more investor sentiment gets worse, so there’s more people who need to sell temporarily, such as stop-loss selling."
Japanese stocks have been caught in a global market rout, spurred by concerns about everything from the U.S.-China trade war to global central banks’ moves to tighten monetary policy. Sentiment has deteriorated in December, with foreign investors offloading billions of dollars in the country’s shares. For Justin Tang, the head of Asian research at United First Partners in Singapore, 20,000 is an important support level, the breaching of which confirms downside momentum.
“This will be the last bastion of hope for Japanese investors," Tang said.
The Nikkei 225 currently trades at 12.9 times estimated 12-month forward earnings, the lowest level since November 2012. Jaiganesh Balasubramaniam, a market technician at Cashthechaos.com, says he’s expecting it to rebound.
It’s “not very" important, Balasubramaniam said of breaching 20,000. “It’s just psychological. Round numbers. The Nikkei will briefly dip below 20,000 to around 19,800 and then will bounce."
The broader Topix index is down 15 percent this month, headed for its worst-ever December in data going back to 1949. The move has been exacerbated by a strengthening yen, which tends to serve as a haven in times of market sell-offs. The Japanese currency has strengthened for eight straight days against the dollar, and is up 3 percent this month.
“It’s more a reaction to the yen," Kerry Craig, a Melbourne-based global market strategist at JP Morgan Asset Management, said of the Nikkei’s recent declines. Craig said he’s positive on Japanese stocks in the longer term, because of positive earnings forecasts and the country’s corporate governance overhaul. But more immediately, he said, it’s hard to escape the global stock rout.
Japan is “very much a beta market that’s going to react to the global growth story," Craig said. “It’s right next to China, so it’s going to get hit by that as well."
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.