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Nikkei takes tumble on concerns over emerging economies

JIJI

Stocks tumbled Monday, pressured by heavy selling amid prevailing uncertainty over the course of emerging economies.

The Nikkei 225 average closed down 295.40 points, or 1.98 percent, at 14,619.13.

The Topix retreated 24.32 points, or 1.99 percent, to finish at 1,196,32.

The TSE kicked off the week with losses on the heels of the setback suffered by Wall Street late last week attributed to risk-averse sentiment following currency instability in emerging economies, brokers said.

Investor sentiment was also chilled after the Chinese manufacturing industry purchasing managers’ index for January, released Saturday, fell for the second straight month, brokers said.

The Nikkei extended its losses due chiefly to a flurry of futures-led selling, brokers said.

Prices accelerated their downswing in the afternoon, weighed down by selling by individual investors to adjust positions to avoid facing margin calls, or requirements to put up additional deposits after falls in the value of stocks they bought with borrowed money, brokers said.

Not only mainstay issues, including automakers, major banks and realtors, but also medium- and small-cap issues were hit by massive selling, brokers said.

“The overall market was covered by uncertainty. Since the Nikkei average slipped below its 26-week moving average, a key support line for the market recently, it may fall to 14,000,” said Hiroaki Hiwada, senior strategist in the investment information department at Toyo Securities Co.

Investors are expected to find it difficult to activate purchases this week prior to the release of key economic indicators abroad and events in Japan, including U.S. government employment data for January, due out Friday, and the Tokyo gubernatorial election next Sunday, brokers said.

Hiwada said “the key to the market is how strong a technical rebound will be” after the recent sell-offs.

Falling issues overwhelmed rising ones 1,592 to 162 in the first section, while 26 issues were unchanged.

All 33 sector subindexes in the first section lost ground.

In the financial sector, mega-bank groups Sumitomo Mitsui and Mizuho fell, along with brokerage firms Nomura and Daiwa.

JGBs find firmer footing

Japanese government bonds rose slightly Monday amid a risk-off mood reflecting lingering concerns over the course of emerging economies.

The lead March futures contract on 10-year JGBs closed up 0.04 point from Friday at 144.78. Volume fell to 23,342 contracts from 26,411.

In late interdealer trading in cash JGBs, the yield on the latest 332nd 10-year issue with a 0.6 percent coupon stood at 0.610 percent, down from 0.620 percent late Friday.

JGBs drew buying from the outset following a rally last week by U.S. Treasuries on safe-haven purchases.

The Nikkei average’s decline helped the key futures contract rise to 144.91 in early afternoon trading, the highest intraday level in about two months for a most-active 10-year contract.

But the market’s topside was heavy, with investors taking to the sidelines ahead of Tuesday’s auction of new 10-year JGBs, a major brokerage house official said.