By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) -- Japanese stocks plunged deep into
losses Friday afternoon on a wave of selling, as remarks from the
Bank of Japan governor failed to ease concerns about a rise in
government-bond yields.
The Nikkei Stock Average , up more than 3% at one point earlier
in the day, was yanked to losses in excess of 3% in extremely
volatile afternoon trading.
Less than an hour ahead of the close, the benchmark was down
1.7%, while the broader Topix was off 1.3%.
The steep losses came even as Bank of Japan Gov. Haruhiko Kuroda
said stability in the country's debt markets was "extremely
desirable," and that the central bank would strengthen
communication with the markets to head off volatility in bond
yields.
"He is trying to make money cheaper, but [the] Japanese
government bond yield is going the other way, and he hasn't said
how he's going to stabilize bond-market yield. ... That's worrying
the market," said Kim Eng Securities director of sales trading
Andrew Sullivan.
The Nikkei Average had plunged 7.3% on Thursday for its worst
decline since March 15, 2011. The losses came against the backdrop
of extreme volatility in the bond market, which forced the Bank of
Japan to step in and offer funds to soothe investor nerves.
The yield on the 10-year Japanese government bond (JGB) yield
rose to 1% Thursday before recovering, even as the Bank of Japan
last month announced plans to buy JGBs on an unprecedented
scale.
On Friday afternoon, the 10-year yield was at 0.84%, according
to FactSet data.
Sullivan said the severe market reaction also reflected
investors' unwillingness to take risks ahead of the weekend, with a
slew of economic data due later on Friday from the U.S. and
Europe.
The U.S. was slated to release numbers on monthly durable goods
orders later on Friday. Germany was slated to issue its May edition
of the IFO index on business confidence.
The sell-off also came as the U.S. dollar (USDJPY) plunged as
low as Yen101.05 after Kuroda's remarks, far off the day's high at
Yen102.58.
Among the movers, shares of Renesas Electronics Corp. plunged
8.8%, and Fast Retailing Co. (FRCOY) tumbled 5%, while Nomura
Holdings Inc. (NMR) skidded 4.3%.
Other markets follow lower
Other regional markets also followed Japanese stocks lower,
giving up their initial gains. Australian shares were hit
particularly hard, skidding on extended losses for the banking and
resource sectors.
The S&P/ASX 200 fell 2% in Sydney, dropping further amid
worries about Chinese economic growth after disappointing
preliminary results from HSBC's survey on manufacturing activity in
China.
South Korea's Kospi lost 0.2%, China's Shanghai Composite traded
flat, and Taiwan's Taiex edged 0.6% lower, while Hong Kong's Hang
Seng Index was off 0.4%.
Financial stocks declined in Sydney amid worries about the
economic outlook. Commonwealth Bank of Australia (CBAUY) fell 2.3%,
and National Australia Bank Ltd. (NABZY) dropped 1.4%.
Resource-sector stocks dropped amid lingering concerns about
demand in the wake of Thursday's China manufacturing data.
BHP Billiton Ltd. (BHP) lost 1.4%, and Woodside Petroleum Ltd.
(WOPEY) gave up 1.6%.
However, Newcrest Mining Ltd. (NCMGF) rose 3.3% after gold
futures rallied overnight.
Shares of Echo Entertainment Group Ltd. plunged 12.9% after
Crown Ltd. sold a 10% stake in the casino operator.
In Hong Kong, shares of Lenovo Group Ltd. (LNVGY) jumped 4.1%,
on top of the 2.9% advance Thursday in the wake of a 34% jump in
annual profit for the computer maker.
But some property developers and insurers mostly fell to keep
the market under pressure, with China Overseas Land &
Investment Ltd. (CAOVY) losing 2.1%, and China Life Insurance Co.
(LFC) down 1.7%.
Developer Cheung Kong Holdings Ltd. (CHEUY) fell 2.6% as the
stock traded without rights to a dividend.
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