Japanese shares tumbled, with the Topix index posting its biggest drop in eight months and entering a correction, after the yen surged as investors shunned risk assets on concern about the global economic outlook.
All 33 Topix industry groups fell at least 2.1 percent. Toyota Motor Corp., the world’s biggest carmaker, sank 5.7 percent. Nippon Paint Co. plunged 21 percent after saying it will sell about 102 billion yen ($1 billion) in shares. Hitachi Zosen Corp., which makes ships and industrial machinery, tumbled 18 percent after cutting its profit forecast by 60 percent.
The Topix plunged 4.8 percent to 1,139.27 at the close in Tokyo, its largest drop since June 13. The gauge has fallen 13 percent from a Jan. 8 high, erasing about 35 trillion yen in market value. The Nikkei 225 Stock Average declined 4.2 percent today to 14,008.47. The yen traded at 101.02 per dollar after gaining 1 percent yesterday to its highest close since Nov. 20. Weaker-than-expected growth in U.S. manufacturing helped extend a rout in global equities.
“I didn’t think instability would spread and bring markets down this far,” said Yoshihisa Okamoto, Tokyo-based head of equity research at Mizuho Asset Management Co. “We didn’t expect this much risk avoidance. Maybe the market overall had a lack of foresight.”
The Nikkei 225 lost 8.5 percent last month for the biggest drop among 24 developed markets tracked by Bloomberg. The measure surged 57 percent last year, the steepest annual gain since 1972, as Prime Minister Shinzo Abe and the Bank of Japan took action to combat deflation.
Some 1,759 of the 1,775 companies on the Topix fell today, the most since Bloomberg began compiling data in 1997. SoftBank Corp. and Maruha Nichiro Holdings Inc. were the only companies on the Nikkei 225 to advance.
The Tokyo Stock Exchange Mothers Index of smaller companies plunged 9.9 percent to 790.24, its biggest drop since June 26, after yesterday falling 8.3 percent. The measure is down 24 percent from its peak on Jan. 22. A fall of 20 percent or more from a recent high signals to some investors that shares have entered a bear market, while a 10 percent decline indicates a correction. The Jasdaq Stock Index sank 4.5 percent today to 94.09.
“Very few would have predicted a fall of above 10 percent in the first month of this year, but given the excellent run into year-end and the large move in 2013, a pullback was widely spoken about,” said Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong. “Until now, this year has been dominated by opportunistic plays rather than long-term investments. The lower we go, the more funds will look for long-term core investments.”
Futures on the Standard & Poor’s 500 Index climbed 0.3 percent. The measure fell 2.3 percent yesterday, its biggest decline since June, as data showed factory activity in the U.S. expanded in January at the weakest pace in eight months as orders slumped, a sign manufacturing cooled at the start of the year along with the weather.
The Institute for Supply Management’s factory index decreased to 51.3 from 56.5 the prior month, the Tempe, Arizona-based group’s report showed. The median forecast of 85 economists surveyed by Bloomberg called for a decrease to 56. Readings above 50 indicate expansion.
A rout in emerging-market currencies began last year when the Federal Reserve said it would cut stimulus and intensified in January after Argentine policy makers devalued the peso and the Turkish lira plunged even after its central bank raised interest rates.
The selloff is spreading to the biggest equity markets. The MSCI World Index of developed stocks has fallen 5.6 percent since Jan. 17, compared to a 6 percent decline for the MSCI Emerging Markets Index.
“The storm, which passed through emerging markets, has now hit the U.S. economy,” said Toshihiko Matsuno, a strategist at SMBC Friend Securities Co., a unit of Japan’s second-largest lender. “At the moment it’s too hard to say whether the storm in the U.S. will just be temporary or whether it’ll drag on.”
Toyota, which counts North America as its largest market, dropped 5.7 percent to 5,500 yen, the biggest drag on the Topix. Honda Motor Co., the second-largest contributor to the measure’s decline, tumbled 6.3 percent to 3,565 yen. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, dropped 3.8 percent to 584 yen.
A Topix gauge tracking non-ferrous metal producers plunged 7.2 percent for the biggest drop among the industry groups, followed by the Topix Machinery Index, which sank 6.3 percent, and the Topix Rubber Products Index, which fell 6.2 percent.
Nippon Paint plummeted 21 percent to 1,337 yen, the steepest drop on the Topix and its biggest decline in almost 40 years of trading, after yesterday saying it would sell up to 102 billion yen in new shares to Wuthelam Group’s unit Nipsea International Ltd.
Hitachi Zosen, tumbled 18 percent to 590 yen, the biggest plunge since 2002 and the largest decline on the Nikkei 225. The company cut its full-year profit forecast by 60 percent to 3 billion yen, missing the 9.3 billion yen estimate by 4 analysts surveyed by Bloomberg.
The Topix traded at 1.15 times book value today, its lowest since June 26. That compares with 2.48 for the S&P 500 and 1.77 the Stoxx Europe 600 Index yesterday. The Japanese gauge’s price-to-estimated-earnings ratio was 13.71 today, compared to 14.77 for the S&P 500 and 13.50 for the Stoxx Europe 600 yesterday. Volume on the Japanese gauge was 54 percent above the 30-day average today.