OVERSEAS : Nikkei Index Eases Down as Pessimism Continues

Share prices slumped again on the Tokyo Stock Exchange today, losing ground despite an opening rally as pessimism continued to grip Japan’s financial markets following Monday’s major plunge.

The Nikkei index, an average of 225 issues, closed the morning session at 27,924.88 yen, down 77.19 points, or 0.28%, from Monday’s finish. The Nikkei plummeted 1,978.38 points, or 6.6%, on Monday, its second-worst one-day loss ever, both in terms of points and percentage. Only the panic selling that followed the “Black Monday” crisis of October, 1987, hurt Tokyo stock prices more.

Investors bought shares in small lots at the beginning of trading today, suggesting bargain hunting might reverse the bearish trend that has slashed the index by 28% since it peaked on Dec. 29 at 38,915.87.

The Nikkei surged by more than 500 points in the first half hour of trading.

But by mid-day the Nikkei had fallen again, sinking below the support level of 28,000 points in search of a new bottom. Traders and analysts predicted more volatility throughout the day.

Individual investors, under pressure from margin calls, were unable to continue buying and supporting the market as they have in recent weeks, Yasuhiko Morita, director of Cosmo Securities, told the Nikkei News Service.

“Even though share prices recovered this morning, no one continued active buying,” Morita said.

The dollar, meanwhile, weakened slightly against the yen in early trading in Tokyo, backing off from the important psychological barrier of 160 yen, which it temporarily shattered Monday. The U.S. currency was quoted at 159.10 yen at mid-morning, down 0.85 yen from Monday’s close.

A recent surge in strength by the U.S. currency has fueled the gloom on the stock market, undermining investor confidence in the ability of Japanese financial authorities to exercise effective monetary policy.