Tech Jitters Hit Tokyo and Seoul Markets
Whatever is bugging U.S. tech investors, it’s bothering Japanese and South Korean tech investors a lot more.
While the U.S. Nasdaq composite index fell Monday to its lowest since July 11, selling in Japanese tech shares pulled the Nikkei-225 index down 1.6% to 16,547.12, its lowest since June 16.
On the Tokyo Stock Exchange’s first section, declining shares overwhelmed advancers 1,089 to 235.
South Korea’s main share index plunged 5.8% to 737.89 Monday, near an eight-week low, as Samsung Electronics and Hyundai Electronics Industries slumped.
At midday today in Tokyo the Nikkei fell 0.5%, and Seoul’s main share index was off by the same amount.
Traders say Japan’s market has two main problems: First, pessimism about Japan’s domestic economy, sparked by the collapse two weeks ago of major retailer Sogo Co., has turned investors wary of stocks in general.
Indeed, the Bank of Japan was expected to begin raising interest rates soon from their near-zero level, betting that the economy’s recovery had legs. But the Sogo bankruptcy forced the Bank of Japan to reconsider.
Japanese bankruptcies rose more than 20% in June from a year earlier, the eighth straight increase, and more companies are expected to fail in coming months, credit researcher Tokyo Shoko Research Ltd. said earlier this month.
The Japanese market’s second big concern is that weakness in U.S. demand for some tech products could translate into weaker demand for Japanese tech exports in coming months.
On Sunday, research firms Dataquest and International Data reported that U.S. domestic PC sales slowed sharply in the second quarter. That slammed U.S. PC stocks on Monday, and pulled Nasdaq down.
Signs late last week that demand for semiconductor manufacturing equipment had weakened somewhat in June from the spring’s blazing pace weighed on chip-related stocks in Japan and South Korea on Monday.
“Global investors are concerned that growth of the semiconductor business will start to slow down as early as late 2001 rather than 2002, which is earlier than expected,” said Lee Young Seog, who helps manage $270 million at Dongwon Investment Trust Co.
In Tokyo that has hurt such stocks as Kyocera, the world’s largest maker of ceramic packaging used to protect finished microchips.
The Tokyo market is already one of the worst-performing this year of major markets. In yen terms the Nikkei’s value is down 13.2% year to date, compared with a 0.3% decline for the U.S. Standard & Poor’s 500 index and a 2.2% loss for the Nasdaq composite.
South Korea’s main share index is down 28.3% year to date.
Japan’s market woes are being reflected in its currency: The yen weakened Monday to 108.77 per dollar, near a nine-week low. As recently as late June it took 104 yen to buy one dollar.
Investors fear that if Japan’s recovery stalls, it will sap demand for stocks and the currency to buy them.
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The Nikkei’s Struggle
The blue-chip Nikkei-225 index of the Tokyo Stock Exchange is slumping back toward its June lows.
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Monday close (In thousands): 16,547.12
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Source: Bloomberg News
