Daiwa Securities Group Inc. (8601) led a plunge in Japanese financial shares, slumping to an eight-week low as the nation’s stock-market retreat worsens the profit outlook.
Japan’s second-biggest brokerage tumbled 11 percent to 764 yen, the lowest since April 9, at the close in Tokyo. Bigger rival Nomura Holdings Inc. (8604) slid 8.4 percent, the steepest drop since November 2011, to 723 yen. Commercial banks also fell, with Shinsei Bank Ltd. (8303) losing 13 percent, the worst performer on the benchmark Nikkei 225 Stock Average (NKY), which declined 3.7 percent.
Securities firms benefited the most from a stock market rally that began last November as investors bet renewed demand for Japanese equities would boost fees and commissions. Those expectations are now being damped as the Nikkei retreats about 15 percent from last month’s peak on speculation Prime Minister Shinzo Abe’s stimulus won’t boost the economy fast enough.
“Brokerages fell because the market reached an inflection point, and investors reckon their fees from investment trust sales to individuals will fall,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “Japanese stocks have risen too much, and now we’re seeing a backlash.”
The nation’s equities are still the best performing among the major developed markets this year, with the benchmark Topix Index and Nikkei up about 28 percent. Shares rallied since mid-November on optimism the government and the Bank of Japan will beat 15 years of deflation.
Commercial banks declined on concern that rising bond yields amid expectations for inflation will lead to losses on their holdings of government debt. Mitsubishi UFJ Financial Group Inc. (8306), the country’s biggest lender, fell 5.4 percent. Sumitomo Mitsui Financial Group Inc. (8316), Japan’s second-biggest bank by market value, slid 5.3 percent and Mizuho Financial Group Inc. dropped 6.2 percent.
“Foreign investors who have been buying bank stocks may be realizing profits,” said Natsumu Tsujino, a Tokyo-based analyst at JPMorgan Chase & Co. “People are also paying attention to how risks of higher long-term bond yields would affect banks’ finances.”
Yields on Japan’s 10-year bonds swung between a record low of 0.315 percent on April 5, the day after the Bank of Japan unveiled a plan to double monthly bond purchases to achieve its 2 percent inflation target, to as high as 1 percent on May 23. The note yielded 0.805 percent at 3:16 p.m. in Tokyo.
The decline in brokerage shares coincided with a Yomiuri newspaper report today that an SMBC Nikko Securities Inc. employee posed as the brother of an 80-year-old woman with dementia to enable her to transfer as much as 50 million yen ($497,000) in assets managed by two other companies.
SMBC Nikko, a unit of Sumitomo Mitsui, received a claim through the Financial Instruments Mediation Assistance Center and “we will handle it sincerely,” Tadataka Ishida, a Tokyo-based spokesman at the brokerage, said in response to questions about the report.
Tsukasa Kinumura, a planning and coordination official at FINMAC, a non-profit organization that represents investors in disputes with banks, declined to comment on specific cases.
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