What Analysts Say About Nikkei's Mid-Afternoon Drop: Roundup

Updated on
  • Japanese benchmarks plunge, then recoup some losses by closing
  • ‘Nothing to worry about,’ one analyst says; rebound may come

Japan's Nikkei 225 Has Highest Close Since 1992

In Tokyo today, it was not an afternoon for a stock trader to catch up on the latest research reports.

In a little over an hour, what had been another solid rally in Japanese stocks turned into some rather sharp clear-air turbulence, with the Nikkei 225 Stock Average plunging about 3.6 percent from the afternoon-session high to its low for the day.

The sudden reversal from the highest levels since 1992 for the benchmark quickly affected the currency market, with the yen climbing. South Korean and Hong Kong equities also tumbled in sympathy. Sydney traders could count themselves lucky their market had already closed before the worst of the sell-off.

So what caused it? Here are some theories:

Takashi Kudo (Head of corporate sales at Moneysquare Japan Inc. in Tokyo):

  • There was some speculation in the market that the drop in equities was due to profit-taking by foreign investors, before the special quotation, and that dragged the dollar/yen lower
  • Typically, declines in stocks lead to yen buying
  • NOTE: Friday, Nov. 10, marks the settlement price of some futures and options known as “special quotation.” The settlement price is calculated after all stocks on the equity measure begin trading on the day

Mitsuo Shimizu (Deputy general manager at Japan Asia Securities in Tokyo):

  • “The biggest factor behind today’s roller-coaster move was position adjustments ahead of the special quotation”
  • “At the end of the day, people came to realize ‘well, corporate fundamentals are still good.’ And then people bought on dips toward the market close”

Hans Goetti (Founder of HG Research in Singapore):

  • The afternoon drop in Japanese stocks may just be a one-day move and is nothing to worry about
  • Japan stocks could rise as much as 30 percent in next few months on earnings, valuations and central bank policy

Jingyi Pan (Strategist at IG Asia in Singapore):

  • “I do think the market is taking profit indeed, but likely due to the fact that it had been an opportune moment”
  • Some of the rhetoric coming out of U.S. President Donald Trump’s China visit had not been the most amicable, and across haven assets, there had been some buying. The reiteration of the need to “address the unfair trade practices” had likely been one alarming the markets

Read more: Trump Hits China for Unfair Trade But Blames Past U.S. Leaders

Tsutomu Yamada (Analyst at Kabu.com Securities Co. in Tokyo):

  • Sudden drop in the Topix and the Nikkei 225 is simply a technical adjustment as the earlier rally was too fast. Some people are taking profits after extreme market advance

Yukio Ishizuki (Senior currency strategist at Daiwa Securities Co. in Tokyo):

  • A pullback triggered gains in the yen against the dollar and other currencies, while the move wasn’t triggered by any news or currency-specific issues

— With assistance by Yumi Teso, Keiko Ujikane, Shingo Kawamoto, Abhishek Vishnoi, and Chikako Mogi

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