Japan Stocks Retreat as Sumitomo Mitsui Leads Banks Lower; Tepco Tumbles

Japanese stocks fell, with banks leading declines as Tokyo Electric Power Co. dropped, and on concern about the outlook for company profits.

Tokyo Electric Power, operator of the nuclear power plant damaged by the March 11 earthquake and also known as Tepco, slumped 6.9 percent, the biggest decline on the Nikkei 225 Stock Average. Sumitomo Mitsui Financial Group Inc. (8316), whose banking unit is the sixth-largest shareholder in Tepco, fell 2 percent as lenders led decreases on the Topix index. Maruha Nichiro Holdings Inc. (1334), which sells seafood, advanced 2.6 percent after Tepco said it stopped highly radioactive water leaking into the sea from a pit near one of its reactors.

“The impact on corporate earnings from the earthquake is likely to be huge,” said Seiichiro Iwamoto, who helps oversee $35 billion in Tokyo at Mizuho Asset Management Co. “It’s hard to read the top line on earnings. Bank shares are falling as we can’t see a bottom to the decline in Tepco shares.”

The Nikkei 225 Stock Average slipped 0.3 percent to 9,584.37 at the close of trading in Tokyo. The gauge has fallen 8.2 percent from the close on March 10, the day before Japan was hit by a magnitude-9 earthquake and tsunami. The broader Topix index lost 0.9 percent to 839.61 today, with about five shares falling for each that gained on the 1,666-member gauge.

‘End to Easing’

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. The index closed little changed yesterday as growing concern that Federal Reserve policy makers will begin removing stimulus measures offset optimism about takeover deals.

“The flipside of the recovery in the U.S. economy is that there’s growing awareness that there will be an end to monetary easing,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.

Tepco shares dropped 6.9 percent to 337 yen, declining for a fourth consecutive day. The company has lost about 84 percent of its market value since the earthquake, and has breached its record low since listing in August 1951.

The shares briefly made gains in the afternoon session today, rising as much as 9.4 percent and reversing declines of as much as 19 percent.

Tepco shares were the most actively traded by volume and value in Japan today. The volume of Tepco shares traded today was also the highest on record, with 303 million shares changing hands.

Investor Support

“With the affordability of the stock in the background, investors aiming for short-term pricing are coming in, and it appears some investors, with strong volition, are trying to support the stock as it’s a key industry representative,” said Mitsuyuki Kobayashi, president of Metzler Asset Management (Japan) Ltd.

“There is no pause in selling on the precaution that investors may be held responsible, or from the potential losses from damages paid.’

The utility may make a preliminary compensation payment of 1 million yen ($12,000) to each household near its crippled Dai-Ichi nuclear plant, Kyodo News reported.

Banking shares were the second-biggest contributors to the Topix index’s declines today. Sumitomo Mitsui Financial Group, whose unit Sumitomo Mitsui Banking Corp. owns a 2.2 percent stake in Tepco, lost 2 percent to 2,494 yen. Mizuho Financial Group Inc. (8411), whose unit owns a 1.5 percent stake in the utility, dropped 1.5 percent to 129 yen. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest listed lender, sank 2.6 percent to 372 yen.

Fishing Stocks

“As well as large financial institutions being the main holders of Tepco stocks, they also have many individual investors as shareholders, and the never- ending decline in their shares is weighing on the market,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo.

Fishing companies as a group rose the most among the Topix index’s sub-indexes today. Maruha Nichiro advanced 2.6 percent to 118 yen, closing higher for the first time in eight days. Nippon Suisan Kaisha Ltd. (1332), which fishes and produces seafood products, gained 1.9 percent to 216 yen. Hohsui Corp. (1352), a subsidiary of Nippon Suisan, which sells frozen seafood, climbed 2.2 percent to 92 yen.

Tepco said it stopped highly radioactive water from leaking into the sea from a pit from the Fukushima Dai-Ichi station after five days of trying to stem the flow.

“It’s a very positive step to stop radioactive water leaking into the sea because the most important thing in a nuclear accident is to reduce the threat to the environment,” said Hironobu Unesaki, a nuclear engineering professor at Kyoto University.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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