Tokyo Stocks Hit 15-Month Low

Tokyo stocks dropped sharply Monday to end at their lowest level since October, 1990, as widespread selling from institutions and futures-linked programs sliced prices.

Trading was thin as many investors sat on the sidelines.

“Nothing is suggesting itself as a valid level of support, and all the things that are supposed to support the market aren’t having any effect,” one foreign broker said. “People are choosing to do nothing, so the market keeps sliding.”

The 225-share Nikkei average ended down 407.55 points, or 1.91%, at 20,913.82, with an estimated 220 million shares traded.

The Nikkei was at its lowest level since Oct. 1, 1990, when it closed at 20,221.86, the trough after it peaked at 38,915.87 in December, 1989.

Investors ignored favorable factors such as low interest rates and the strong yen and remained focused on excess supply, brokers said.

“All the things that are supposed to support the market aren’t having any effect,” said Paul Migliorato of Jardine Fleming Securities.

“We already knew the market is not interested in lower interest rates, now we know it’s not interested in a stronger yen or bonds,” said broker George Nimmo of SBCI Securities. “The market’s talking point remains forced selling by institutions.”

Institutional investors are shifting holdings and rushing to complete sales ahead of the end of the fiscal year in March.

Brokers said prices have fallen to attractive levels, but the market lacked a cue to turn things around.

“There’s nothing to point to that says ‘start buying,’ ” said Shigeru Akiba of UBS Phillips & Drew. “People talk of 20,000 as a buying level, so we may see more activity nearer there.” Any buying interest was dampened by worries or political scandals after a senior politician close to the prime minister was arrested on bribery charges last week, brokers said.

In the long run, only clear indications that the economy is picking up and that corporate profits are bottoming out will turn the stock market around, brokers and analysts said.

“Once we see a bottom to the U.S. economy, people will start to see the fundamentals of the Japanese economy and stop basing decisions on technical supply-demand factors,” Lehman Bros. strategist Michael Morizumi said.

Among regional markets, the sharp slide in Japanese equities triggered heavy profit-taking in Australian stocks, causing the leading index to fall off its highs.

The All Ordinaries index gained almost 10 points in morning trading but did an about-face and fell back in line with Tokyo to close 6 points lower at 1,667.5.

Stocks in Hong Kong surged, pushing the Hang Seng index through the 4,500 level in heavy trading as small investors returned to the market after the resolution last week of a Sino-U.S. trade dispute, brokers said.

The blue chip index rose 55.58 points, or 1.25%, to end at 4,510.47.

“Sentiment toward the local stock market is so bullish that investors here are just ignoring the Japanese market for the time being,” said James Osborn, Baring Securities assistant director in Hong Kong.

Taiwan share prices soared across the board.