Japan share market - sad results of year - Tokyo stock market

However, forecasts from the USA about the future losses of financial sector also have promoted rather sad end of year.

Following the results of the auctions at the Tokyo stock exchange on Friday, index Nikkei 225 Stock Average has fallen to 256,91 points, or 1,7 %, having closed on a mark 15307,78. The Topix index of wide market has gone down on 24,26 points, or 1,6 %, to level 1475,68. The given figures remain in history as closing levels for 2007. After two hours of the auctions, the Tokyo stock exchange has finished the work and will open only on January, 4th on the next truncated auctions. Results of year have turned out rather sad. Nikkei Index has fallen off for a year on 1918,05 points, or 11,1 %, and Topix has failed on 12 %. 2007 became the first of last five years when the Japanese indexes have finished an annual cycle with fall.

The basic losses for a year were incurred by bank sector. Mitsubishi actions (UFJ (MTU)) have decreased on 1047 yens on last auctions day of leaving year, Sumitomo Mitsui Financial Group Inc decreased on 3,2 %. Have fallen to 3,1 %, and Mizuho Financial Group Inc. (MFG) have decreased on 2,9 %. Following the results of a year, the bank sector of Topix index has fallen off on 28 % that became the worst result among 33 industrial groups of an index.
Hypothecary crisis in the USA (which has led to a collapse in the structured debts market provided with actives in the USA that became a basis for losses of the America financial companies) became the main problem of the Japanese banks.

Last day of the auctions also has been saddened by the next forecast of the American authoritative investment bank. Large American banks need to prepare for new large write-offs. Investment bank Citigroup (C) can lower the size of dividends on 40 % that “to support capital level”. Its competitors, Merrill Lynch (MER) and JPMorgan (JPM) following the results of current quarter can write off $33,6 billion Reason former – aggravation of world crisis in the credit markets. The analytical note of American investment bank Goldman Sachs testifies to it (GS).

However, year has stood out rather difficult for the export companies. Problems in the USA economy hung a sword of Damocles over prospects of export from the Japanese islands. The USA economy has shown quite good rates of growth in 2007, but going deep hypothecary crisis has called into question the further development. Many experts say about increase of probability of recession in the USA that will negatively affect the Japanese export.

 Toyota action have fallen to 2 % on auctions last day of the leaving year, having finished a year decrease on 24 %, Canon Inc. (C) have fallen to 2,6 %, and Sony Corp. (SNE) have fallen in price on 2,2 %. However, Sony safety stock have finished year with growth on 22 %.

The yen also became rather bright factor of influence on quotations of exporter’s safety stock during a year. Japanese currency was below 120 yens for dollar stably in first half 2007, but the yen has begun the prompt strengthening in second half of year. Japanese currency exchange did not please the export companies also at the Tokyo stock on auctions last day. Its course has become stronger again above a mark in 114 yens for dollar. The tendency to decrease in yen course allows the Japanese companies to receive additional incomes at converting of foreign sales back in yens, and the low rate of national currency raises goods competitiveness made in the Country of a rising sun (Japan). Following the results of a year, the dollar diminished concerning yen almost on 5 %, but has presented to the Japanese companies the magnificent period during several months in first half of year when it was much stronger.

Certainly, the auctions were influenced also by a situation on foreign platforms which has sharply become complicated after conditions destabilization in Pakistan. News about murder of oppositional politician Benazir Bhutto in Pakistan began to be untwisted sharply in world mass-media, acquiring negative forecasts and the additional information. First of all, Pakistan is not large power or economic power, but possesses the nuclear weapon. A nuclear bomb experts name a main objective of those who has carried out Bhutto’s murder . If in world financial scale and scale of the oil market given event has no direct sense, but it bears in itself a number of the indirect factors capable seriously to affect conditions in the world and dynamics in the commodity and financial markets.

First, Pakistan is nuclear power and any instability in the similar country complicates an international situation. If the nuclear weapon comes into the hands of terrorist groupings, it becomes the instability factor all over the world which will sharply raise volatility in the markets. Besides, destabilization in Pakistan can be thrown and on neighbouring countries, and near to nuclear Pakistan there is Iran where (by various estimations) the second-large oil stocks in the world contain. Thus, again on extraction region, and delivery routes, the geopolitical factor starts to operate.

Secondly, it is necessary to note other aspect of the Pakistan problem. Destabilization conditions in this country can lead to deterioration of an investment climate in region which India also concerns. India (on a level with China) is considered as one of locomotives of economic development. The country with the milliard population shows high rates of economic development and growth of the various raw goods consumption. Thus, instability in Pakistan which traditionally has difficult relations with India can affect India economic development.

Macroeconomic data across the Japan also do not please. The situation on labour market beginning to vary sharply. There were 0,99 workplaces on each applicant for work in November, though in October this indicator was levelled 1,02. Japanese households expenses have sharply gone down also on 0,6 % in November, and the base indicator of inflation has grown on 0,4 %, without fresh products. However without products and price energy carriers all the same have fallen to 0,1 %. The similar situation causes anxiety in the country government. Under statement Hiroko Ota, the Minister of Economics, it is inflation which is warmed up by the prices for oil. She believes that the similar rise in prices can negatively affect economic development of all economy as will constrain consumer activity and to reduce profit of the companies.

The auctions on Friday on December, 28th have come to the end with a ceremonial applause that became tradition at the Tokyo stock exchange. Far not all participants of the market have finished year with optimism. Perhaps, that only most desperate "bears" of the Japanese market were happy with results of year though also they had in loss within last 12 months. The market showed high volatility and even some times fell off more than on 3 %. The collapse on August, 17th when Nikkei has failed almost on 900 points was especially memorable.

However, analysts have a joke which says: “that the market grew, it needs to fall a little”. Therefore many experts tend to that the Japanese actions will appear in more favourable position in 2008, than following the results of the past of 2007. The Japanese corporations possess rather solid indicators, at the companies enough the means for development, and commodity markets are diversified. Certainly, there are alarms concerning economic development in the Japan and in the USA which are one of the most important markets for the Rising sun Country, but economic, let and slower rates, but will continue the development in 2008 that will create a basis for restoration of the Japanese export positions. At improvement of a world economic situation the Japanese actions can become again attractive to investors that will cause growth of the share market of the country.

News Sorce: Andrey Kochetkov, analyst K2Kapital, www.k2kapital.com