/

Tokyo investors smarting as Nikkei tumbles 479 points

Kyodo, Bloomberg

The Nikkei stock index tumbled by more than 2 percent Tuesday as investors remained jittery over China’s economic outlook, extending its New Year losing streak to a record sixth day.

The 225-issue Nikkei Stock Average ended down 479 points, or 2.71 percent, from Friday at 17,218.96, a roughly three-month low. Tokyo markets were closed Monday for a public holiday. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 45.37 points, or 3.13 percent, lower at 1,401.95.

Tokyo stocks continued to slide throughout the day after opening lower in the morning, as market angst over China showed no signs of subsiding. The yen, traditionally considered a safe haven in times of turmoil and uncertainty, has risen more than 2 percent against the greenback so far this year.

The benchmark equity gauge has tumbled 9.4 percent in 2016, buffeted by turmoil in China’s markets and a resulting strengthening in the yen. That’s the biggest drop to start a year, according to Tokyo’s bourse.

Concern that turmoil in China’s stocks and currency will spread to the economy helped spur declines in global markets this year, with crude tumbling 18 percent. China stepped up its defense of the yuan on Tuesday, buying the currency in Hong Kong and sparking a record surge in the city’s money-market rates to deter bearish bets.

“Worries about China persist,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., which oversees about $115 billion. “It’s too early to say that we’ve found the bottom until we see more stability in the Chinese currency and until we see more confidence regarding global growth.”

The Shanghai Composite Index rose 0.2 percent after dropping below the 3,000 level for the first time since September. The gauge sank 5.3 percent on Monday, extending the world’s biggest selloff this year, even after state-controlled funds intervened in the market last week.

“Everyone rational wants to sell, while everyone official has been told to buy,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “By throwing good money after bad, it just delays the inevitable.”

But not everyone is pessimistic.

Companies will buy back a record ¥7.5 trillion ($64 billion) of shares in the 12 months starting April, after ¥5.9 trillion of repurchases in the current fiscal year, Goldman Sachs strategists including Kathy Matsui wrote in a report dated Tuesday.

That will help send the Topix index up 28 percent by year-end from Tuesday’s close, according to their projections.

Goldman Sachs says Prime Minister Shinzo Abe’s overhaul of rules to make companies more focused on stock owners and less prone to hoarding cash will put the Topix back on an upwards trajectory.

“The market made a rocky start to 2016, falling for the first five days, but we remain bullish,” the report said. “The advances made in corporate governance reform put cash holdings in the spotlight and have resulted in increased returns to shareholders. Looking ahead, we expect to see moves further focused on shareholders.”