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Nikkei retreats sharply on futures-led selling

JIJI

Stocks took a sharp downturn Wednesday, hit by activated futures-led selling in the afternoon amid the yen’s strengthening.

The 225-issue Nikkei average closed down 518.89 points, or 3.83 percent, at 13,014.87, the lowest finish since April 5. On Tuesday, the key market gauge surged 271.94 points.

The Topix index of all first-section issues tumbled 35.44 points, or 3.15 percent, to end at 1,090.03, after climbing 28.52 points the previous day.

After opening slightly higher, the Nikkei average briefly fell more than 120 points due to profit-taking after Tuesday’s rally.

But the index pared losses on buybacks and hovered around the previous day’s closing level for the rest of the morning ahead of Prime Minister Shinzo Abe’s speech on the third part of his growth strategy.

Following the speech in a seminar organized by Research Institute of Japan in the early afternoon, the Nikkei average jumped to exceed 13,700, fueled by the yen’s plunge and a spurt in stock index futures.

After the buying ran its course, however, stocks headed south to sink into negative territory again. The key price indicator expanded losses by more than 500 points by late trading, amid index futures coming under renewed selling pressure and the yen regaining strength.

The stock selloff can be attributed at least in part to no positive surprise in Abe’s speech, market sources said.

In the seminar, Abe unveiled plans to set up special strategic zones for deregulation, lift a ban on online drug sales and increase gross national income by ¥1.5 million per head over the next 10 years.

As these growth measures had already been reported by media, some players who were expecting fresh policy announcements turned to sell stock index futures to buy bond futures, a move that triggered the massive cash stock selling,” said Hiroichi Nishi, equity general manager at SMBC Nikko Securities Inc.

Losers far outnumbered winners 1,325 to 340 in the TSE’s first section, while 51 issues were unchanged. Volume fell to 4.368 billion shares from Tuesday’s 5.124 billion.

Bourse fall up JGBs

Japanese government bond futures bounced back Wednesday on the heels of a stock selloff.

The lead June contract on 10-year JGBs closed up 0.28 point from Tuesday at 142.78. Volume fell to 39,120 contracts from 42,405.