Tokyo Stocks Surge After Day of Volatile Trading : Securities: The market soared 576 points, or 1.73%, in a late rally. It had seesawed most of the day on traders’ fears that Monday’s slide might continue.
Japanese stock prices rallied today after seesawing wildly despite efforts by government and exchange officials to calm investors.
The key 225-share Nikkei index surged 576.08, or 1.73%, in a late rally to close at 33,897.95, its first daily gain since Thursday. The index rose 200 points in the first hour of the morning session but slipped in moderate trading to end the morning session down 171.30, or 0.51%. After the start of the afternoon session it fell to a day’s low of 32,793.24, before rallying.
Brokers said futures-related selling appeared to have eased off and institutional buyers had become less timid about buying. “We’re seeing general buying coming in now,” said a trader at a Japanese brokerage.
But they also said the bearishness over high interest rates and a weak yen, which caused the Nikkei to plunge Monday, had by no means disappeared.
The Nikkei had closed Monday with a loss of 1,569.10, to 33,321.87--a 4.5% drop, second only to the Oct. 20, 1987, plunge. That followed a decline of more than 2,000, or 6.9%, last week.
The yen also continued to fall in morning trading, largely ignoring efforts by the Bank of Japan to boost the currency’s value.
At a press conference here early today, Finance Minister Ryutaro Hashimoto said the situation in the stock and currency markets had improved, but he added that “it’s still not at the stage where I can feel comfortable.”
He also said he had no indication that the Bank of Japan was altering its monetary policy.
The central bank’s efforts to push interest rates sharply higher during the past year--to fight inflation--are largely responsible for the Tokyo stock market’s troubles, many traders say. Since closing last Dec. 29 at an all-time high of 38,915.87, the Nikkei had lost 14.4% of its value through Monday.
Recounting Monday’s harrowing fall, a brokerage clerk said in a TV interview after the market close: “The faces of everyone around me turned blue.”
Some traders said the Monday plunge was directly linked to worries that the Bank of Japan plans once again to raise its discount rate, a key interest rate that affects other market rates.
But Finance Minister Hashimoto cited political uncertainties. Although the Liberal Democratic Party retained control of the lower house of Parliament in the Feb. 18 election, it no longer controls the upper house. Yet that has been the situation since elections for the upper house last July.
Hashimoto also cited a stalemate in trade talks with the United States. That stalemate led President Bush to invite Prime Minister Toshiki Kaifu to an emergency summit conference scheduled for Friday and Saturday in Palm Springs.
There was widespread agreement that computer-driven program trading, taking advantage of gaps between stock prices and stock futures indexes, was the main technical factor involved. The predominance of sell orders Monday in lighter-than-normal trading was also a factor, brokers said. Only about 30% of all outstanding stocks are ever traded; the rest are held by banks, insurance companies and interlocking directorates as “stable stockholders.”
At one point Monday, the Nikkei average was down 2,447, or 7%, before purchases by Japan’s Big Four brokerages pulled up the average in the last hour of trading.
The Tokyo Stock Exchange announced Monday that it was easing its controls on margin trading for the third time since the beginning of the year. It also asked brokers to limit their program trading to the beginning of the morning and afternoon sessions and to refrain from such trading at other times.
As trading began today, Reuters news service reported that program trading continued virtually unabated.
Meanwhile, the Bank of Japan, in a bid to stop the yen from weakening further, began dumping U.S. dollars and buying yen in the Sydney, Australia, market early today. The yen was then trading at about 148.30 to the dollar. It had closed Monday in New York at 148.65 yen, compared to 147.05 on Friday and the lowest since June 14, when a dollar bought 149.50 yen.
At the end of morning trading today, the yen was trading at 149.25 to the dollar, another dip of 0.60 yen compared to Monday’s closing in Tokyo.
Monday, Hashimoto reemphasized that Japan’s economy remains sound, with prices stable and growth continuing. But he acknowledged his concern over “speculative expectations” that he said had taken hold in the markets.
Yuji Shimanaka of Sanwa Bank’s research center said the plunge in stocks was an adjustment to unreasonably high prices last December.
“My calculations of what stock prices ought to be, based on corporate profits, yields and the situation of excess liquidity, show that the 32,000-32,999 level is where the average ought to be,” he said.
“By the same token, there are no economic reasons for the market to fall further. But a vicious cycle with the yen has set in.”
Shigeru Yoshida of the Bank of Osaka agreed that the decline was a reaction to December’s surge in prices. Bank of Japan officials, asking not to be quoted by name, told Japanese reporters that they regarded the stock plunge as an adjustment to excessive gains two months ago.
Takashi Murakami of Nikko International Capital Investment Co. predicted that the plunge will not stop until the Nikkei average reaches 31,000, about 20% below the year-end level.
But Masahiro Kakeya of Tokyo Securities said: “We can’t find a bottom for the market by using existing technical indicators.”
From its start Feb. 19, the setback has confounded brokers here. In one profoundly mistaken prediction, Nomura Securities, the world’s largest brokerage, said on the first day of the downturn: “With the lower house election, the biggest source of recent uncertainty has been left behind. The Tokyo stock market now is expected to resume turning upward.”
Brokers feared that the central bank had been waiting for the votes to be counted before raising its central discount rate, so as not to damage the ruling party at the polls.
Yasushi Mieno, the bank’s governor, said Monday that he was concerned about the triple plunge of stocks, yen and bonds but added: “We don’t change monetary policy only because stock prices or the yen moves drastically. We base any change on an overall consideration of economic conditions, prices, currency rates, money supply and other factors.”
THE NIKKEI NOSE DIVE
Daily close of Nikkei index of 225 stocks.
Monday close: 33,321.87, down 1,569.10, or 4.5%. Early afternoon Tuesday: 32,858.85, Down 463.02.
