Japan’s shares tumbled, with the Nikkei 225 Stock Average and Topix index suffering their third-worst daily declines in history, on record trading volume as concern grew about the safety of nuclear plants damaged by the country’s worst earthquake.
Tokyo Electric Power Co., Asia’s biggest power generator, plummeted by the daily limit of 25 percent after the company confirmed an explosion at a third reactor and a fire at a fourth today at its nuclear plant in Fukushima, north of Tokyo. Hitachi Ltd., which provides nuclear power generation systems, plunged 13 percent. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, at one point declined to the lowest since its listing in Tokyo.
The Nikkei 225 Stock Average fell 11 percent to 8,605.15 at the market close in Tokyo, the lowest since April 2009. It earlier declined as much as 14 percent, its biggest intraday slide since the stock market crash of October 1987.
The broader Topix index declined 9.5 percent to 766.73, the lowest close since March 2009 and its biggest intraday decline since October 2008.
“The decline is just like a tsunami,” said Yutaka Yoshii, a strategist at Tokyo-based Mito Securities Co. “Production and commercial activities should slump as there’s many manufacturing bases of electronics parts makers in Tohoku area and because blackouts are planned. Stocks are pricing in uncertain factors including the nuclear accident.”
Three days of declines have wiped more than $680 billion from the market value of stocks in the Tokyo Stock Exchange’s first section, which makes up the Topix. The gauge earlier fell by as much as 14 percent, taking its two-day decline to an intraday record of 21 percent.
Record Trading Volume
Today’s losses for the Nikkei 225 and Topix are their third worst after only the Black Monday stock market crash of 1987, when they lost a record 14.9 percent and 14.6 percent respectively, and less than a percentage point behind Oct. 18, 2008, when markets tumbled in the wake of the collapse of Lehman Brothers Holdings Inc.
The total number of shares traded on the Tokyo Stock Exchange’s first section reached a record for a second day. More than 5 billion shares changed hands, exceeding yesterday’s 4.88 billion shares.
Implied volatility on the Nikkei 225 Stock Average, a measure derived from the cost of options prices to protect against losses over the next three months, surged 39 percent to 40.49, the highest since July 2009, data compiled by Bloomberg showed.
The Nikkei 225 has fallen 21 percent from its high this year on Feb. 21. A slump of 20 percent or more signifies a bear market to some investors.
Nikkei 225 futures plunged as much as 17 percent in Singapore and 18 percent in Osaka after Japanese Prime Minister Naoto Kan said the risks to public health stemming from a crippled nuclear power plant in Fukushima, northern Japan, are increasing. The contracts fell to 8,510 in after-hours trade. Nikkei futures traded in New York fell to 8,525.
Futures on the Standard & Poor’s 500 Index tumbled as much as 3 percent today.
“There’s global concern about a major nuclear accident in Japan, which could turn a very bad situation into a terrible one,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., which manages about $98 billion. “Nuclear fallout spreading across Japan with wide-scale evacuations in Tokyo, the economic implications could be severe.”
Arbitrage Trading Halted
The Tokyo Stock Exchange halted trading of Topix index futures twice after prices plunged at 12:31 p.m. and at 12:50 p.m., according to Masanori Onda, an official at the bourse’s derivatives department. The exchange halted arbitrage trading of Topix stocks after the index fell more than 100 points. The exchange said it would lift the halt when the gauge rose above 776.96.
Selling that had been confined to Japan spread throughout Asia as benchmark indexes in Hong Kong and Taiwan falling more than 3 percent, while stocks in China declined 1.9 percent and Korean shares declined more than 2 percent.
Tokyo Electric Power said an explosion occurred at its Fukushima Dai-Ichi nuclear plant between 6 and 6:15 a.m. today. The company is evacuating workers after the blast at the No. 2 reactor, and will continue to pump water into the unit, a company spokesman said in a briefing broadcast on public NHK television. The stock, which had daily limit declines of 25 percent for a second day, closed at 1,221 yen, a level not seen since November 1984.
Utilities Lead Drops
The Tokyo Stock Exchange sets a limit on how much higher or lower a stock can be traded from the last closing price.
Tokyo Electric Power started power outages in parts of the greater Tokyo area yesterday, and it will continue rolling blackouts today, beginning before 7 a.m. local time.
The U.S. Geological Survey increased its rating on the magnitude of the March 11 earthquake that hit Japan to 9 from 8.9. The death toll from the earthquake and tsunami rose to 2,414 at 8 a.m., according to the National Police Agency in Tokyo.
Other utilities companies also declined with the sharpest slide among the 33 industry groups in the Topix. Tohoku Electric Power Co., which provides electricity to disaster stricken areas including Fukushima, Iwate and Miyagi prefectures, retreated by a daily limit for a second day to 1,186 yen. Kansai Electric Power Co. plunged 12 percent. Chubu Electric Power Co. tumbled 11 percent. Tokyo Gas Co. dropped 12 percent.
“The deterioration of the situation is accelerating because of radiation leakage and a plant explosion,” said Masayoshi Yano, a senior market analyst at Tokyo-based Meiwa Securities Co. “Social anxiety is increasing.”
Nuclear power companies slumped. Toshiba Corp., a maker of nuclear reactors, plummeted by the daily limit of 80 yen, or 19 percent. Hitachi Ltd., which provides nuclear power generation systems, plunged 13 percent and was the most actively-traded stock in Japan. Mitsubishi Heavy Industries Ltd., a developer of nuclear power plants, tumbled 11 percent.
“We still don’t know what the damage really is in Japan,” said Stephen Wood, New York-based chief market strategist for Seattle, Washington-based Russell Investments, which has $155 billion in assets under management. “If you have stability of forecasts and stability of data, that allows people to invest. That’s why markets sell off when something goes from being uncertain to being unknowable.”
Japan Steel Works Ltd., a maker of components for nuclear pressure vessels, slumped by the daily limit of 100 yen, or 16 percent. Deutsche Bank AG. analyst Toshiharu Morota cut his rating on the company to “hold” from “buy” and reduced the 12-month share price estimate by 40 percent to 600 yen. Morota cited issues of credibility in Japan’s nuclear power generation.
Mitsubishi UFJ Financial Group fell to as low as 321 yen, a level not seen since its listing in April 2001. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest lender by market value, dropped 7.2 percent while Mizuho Financial Group Inc., the No. 3, lost 10 percent.