Japan Exchange Tumbles After Forecast Misses Estimates

Japan Exchange Group Inc. (8697), the main bourse operator in the world’s second-largest equity market, tumbled in afternoon trading after forecasting full-year profit that missed analyst estimates.

Net income for the year through March 2015 will be 21 billion yen ($206 million), JPX said today, 35 percent short of the 32.5 billion yen average estimate of nine analysts surveyed by Bloomberg. Profit for the year ended March 31 was 29.8 yen, compared with the exchange’s projection of 29.5 billion yen and analysts’ prediction of 30.6 billion yen. Japan Exchange shares slumped 5.7 percent as of 12:41 p.m. in Tokyo, heading for the biggest drop since Aug. 12. The Topix index slid 1.1 percent.

“This company is always cautious and you have to keep in mind they revised their outlook several times in the previous period,” said Hiroshi Torii, a Tokyo-based analyst at Deutsche Bank AG. “What the market is waiting for is more details on their strategy following the completion of the merger.”

The forecast, which would represent a 30 percent fall in net income compared to the year ended March, comes as Japanese equities lose their allure after surging in 2013. Foreign investors have been fleeing the market after buying the most stocks on record last year.

Japan Exchange was established in January 2013 through the merger of Tokyo Stock Exchange Group Inc. and Osaka Securities Exchange Co. as part of a state plan to streamline the industry amid slumping volume and increased international competition. JPX integrated the Tokyo and Osaka derivatives markets in March after combining cash equities in July.

Record Volume

Trading volume on the first section of the Tokyo Stock Exchange reached a record in the year ended March 31, the bourse said on April 1, with 785 billion shares changing hands. Attempts by Prime Minister Shinzo Abe and the Bank of Japan to stoke inflation spurred a surge in demand for the nation’s equities and sent the Topix index up 51 percent in 2013 for its biggest gain since 1999.

The Topix lost 10 percent this year through last week, the biggest slump among major developed markets tracked by Bloomberg, as the euphoria created by Abe’s policies shows signs of wearing off.

JPX will adopt international financial reporting standards from the year ending March 2015 to make it more comparable with overseas exchanges, the bourse said today.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editors responsible for this story: Tom Redmond at tredmond3@bloomberg.net Jim Powell

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