Nikkei plummets more than 6%, biggest fall since 2008

Bloomberg

Stocks fell 6.18 percent, the most in more than two years, after the nation’s strongest earthquake on record, and massive tsunami, snarled production lines and shut factories, raising concerns that economic growth will stall.

Tokyo Electric Power Co., Asia’s biggest power utility battling to avoid a meltdown at its Fukushima nuclear plant, plunged 24 percent. Toshiba Corp., a maker of nuclear reactors, fell 16 percent. Tokio Marine Holdings Inc., the nation’s largest property and casualty insurer by market value, fell 13 percent. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. all retreated at least 6.5 percent after Japan’s three-largest automakers said thousands of new vehicles were damaged. Construction companies climbed.

The Nikkei 225 stock average slumped to 9,620.49 in the sharpest drop since December 2008. The broader Topix index retreated 7.49 percent to 846.96, falling the most since October 2008. Most stocks were initially unable to begin trading at the open as sell orders overwhelmed those to buy.

“Markets were already in a corrective mode and the tragic events in Japan have provided a further impetus,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages about $98 billion.

In response, the Bank of Japan poured a record ¥15 trillion into the world’s third-biggest economy Monday as the strongest earthquake in the nation’s history triggered a plunge in stocks and surge in credit risk. Besides the ¥15 trillion in emergency funds, the BOJ offered to buy ¥3 trillion in government bonds from lenders in repurchase agreements starting March 16.

Trading of Topix index futures on the TSE was halted for 15 minutes starting at 9:04 a.m. Monday. The circuit breaker was implemented after a plunge of more than 75 points, spokeswoman Yukari Hozumi said by phone Monday.

The Osaka Securities Exchange, Fukuoka Stock Exchange, Nagoya Stock Exchange, Sapporo Securities Exchange are operating as usual, according to their websites.

The 9.0-magnitude earthquake and subsequent tsunami may have killed 10,000 people in Miyagi Prefecture.

“The size of the economy of the main earthquake-affected region is roughly the same as that of the area hit by the Great Hanshin (Kobe) earthquake in 1995, but with this Tohoku Pacific (Sendai) earthquake affecting road networks, power plants and other infrastructure over a wide area, we expect the short-term economic impact to be greater than the Kobe earthquake,” Nomura Holdings Inc. economists led by Takahide Kiuchi wrote in a report dated Sunday.

Radiation levels around the Tepco station in Fukushima rose after cooling systems at reactors failed. The utility said it has started service outages in parts of the greater Tokyo area Monday

Tepco shares plummeted ¥500, the daily trading limit, or 24 percent, to ¥1,621, leaving massive sell orders untraded due to the glut of such orders.

Nuclear reactor-related companies, including Toshiba and Hitachi, and insurance companies are also among those that slumped hard.

Credit Suisse Group AG cut its Nikkei 225 stock average target price for the end of March by 18 percent to 9,000 from its previous estimate of 11,000 because of the impact from Japan’s strongest earthquake on record on its economy and corporate profits.

Recovery may be slow as the damage is more widespread than after the Kobe quake, and “it’s inevitable that economic growth and profit outlook need to be cut,” Credit Suisse strategist Shun Maruyama wrote in the report.

The yen appreciated to 80.62 against the dollar before sliding to 82.45. It traded at 82.90 at the close of stock trading in Tokyo on March 11.

Construction companies were the only group in the Topix that advanced Monday. Kajima Corp. soared 32 percent. Obayashi Corp. surged 16 percent. Shimizu Corp. jumped 18 percent. Taisei Corp. leaped 23 percent.