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JPX misses estimates as slump continues

Bloomberg

Japan Exchange Group Inc., the main bourse operator in the world’s second-largest equity market, tumbled in afternoon trading after forecasting full-year profit that missed analyst estimates.

Net income for the year through March 2015 will be ¥21 billion ($206 million), JPX said Monday, 35 percent short of the ¥32.5 billion average estimate of nine analysts surveyed by Bloomberg. Profit for the year ended March 31 was ¥29.8 billion, compared with the exchange’s projection of ¥29.5 billion and analysts’ prediction of ¥30.6 billion.

Japan Exchange shares dropped 6.23 percent at the close in Tokyo, while the Topix index slid 0.79 percent.

“This company is always cautious and you have to keep in mind they revised their outlook several times in the previous period,” said Hiroshi Torii, a Tokyo-based analyst at Deutsche Bank AG. “What the market is waiting for is more details on their strategy following the completion of the merger.”

The forecast, which would represent a 30 percent fall in net income compared to the year ended March, comes as Japanese equities lose their allure after surging in 2013. Foreign investors have been fleeing the market after buying the most stocks on record last year.

Japan Exchange was established in January 2013 through the merger of Tokyo Stock Exchange Group Inc. and Osaka Securities Exchange Co. as part of a state plan to streamline the industry amid slumping volume and increased international competition. JPX integrated the Tokyo and Osaka derivatives markets in March after combining cash equities in July.

Trading volume on the first section of the Tokyo Stock Exchange reached a record in the year ended March 31, the bourse said on April 1, with 785 billion shares changing hands. Attempts by Prime Minister Shinzo Abe and the Bank of Japan to stoke inflation spurred a surge in demand for the nation’s equities and sent the Topix index up 51 percent in 2013, for its biggest gain since 1999.

The Topix lost 10 percent this year through last week, the biggest slump among major developed markets tracked by Bloomberg, as the euphoria created by Abe’s policies shows signs of wearing off.

JPX will adopt international financial reporting standards from the year ending March 2015 to make it more comparable with overseas exchanges, the bourse said on Monday.