Reactions to sharp sell-off in Japan stocks
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Aug 5 (Reuters) -Japanese stocks collapsed on Monday in their biggest single day rout since 1987's Black Monday selloff, driven by last week's plunge in global stock markets, economic concerns and worries investments funded by a cheap yen were being unwound.
The Nikkei share average .N225 shed a staggering 12.4% as Asian markets caught up with Friday's dismal U.S. jobs data and chatter of recession, and as the yen JPY= rallied to 7-month highs versus the dollar. The broader Topix .TOPX also shed more than 12%.
QUOTES:
TSUTOMU YAMADA, MARKET ANALYST, AU KABUCOM SECURITIES, TOKYO
"What we witnessed today was an exceptionally rare market. We saw a 1,000 yen drop, 2,000 yen drop, then 4,000 yen dive … this panic-selling reminded me of a similar panic market after the 3/11 great earthquake in northern Japan when investors had no idea what to do and a chain of selling triggered another wave of selling. But such heavy-selling can't last long. The market might open lower again tomorrow morning but it can't drop much further from this level.
"Investors are trying to gauge where the next FX range is, whether it's 140-150 yen or 130-150 yen per a dollar, but until then, an edgy stock market would likely to last. The one thing for sure is that we are seeing a change in the 'bull stock market and weak yen' trend that started in 2013.
KEI OKAMURA, PORTFOLIO MANAGER, NEUBERGER BERMAN, TOKYO
"It's a perfect storm ... you've got the BOJ rate hike and QT, part of it was expected and part of it wasn't. And then, of course on top of that, you got news out of the U.S. on the Fed not moving on rates and suggesting they will at September but that raised speculation that perhaps they would be moving too slow, and that was confirmed with the jobs data. And then we had chipmaker numbers like Intel that was significantly weaker.
"I think that raised flags about AI demand ... they all feel like the key trades that were driving Japan equities, vis-a-vis, the weak yen and the gen AI, semiconductor plays. And so we've been seeing some pretty big reversals off those trades.
"But clearly in the past few trading sessions, we've seen it completely broaden out and I think if there's just this panic selling in the market, and it's akin to what we saw in Lehman, where you just saw one level after the other just getting knocked out and just going further down.
"And I think we haven't seen the bottom yet."
TAKATOSHI ITOSHIMA, STRATEGIST, PICTET ASSET MANAGEMENT JAPAN, TOKYO
"Especially for the auto sector, if the yen rises by nearly 20 yen in one go, from 162 yen to 142 yen per dollar, then people will probably think that the yen will continue to appreciate. This makes them think that automakers won't be profitable ... and there are concerns about an economic slowdown, so if the U.S. economy slows down, cars won't sell and the tariff issue remains clear ahead of the U.S. presidential election. In addition to that, automakers have a heavy weight in both the Nikkei and the Topix, so they are being sold on movements of index futures.
"They are being sold as a package, so they're likely to be dragged down until the current storm subsides, regardless of whether their performance is good or bad."
BRUCE KIRK, CHIEF JAPAN EQUITY STRATEGIST, GOLDMAN SACHS, TOKYO
"You can see this correction perhaps as a by-product of what has to date been a very concentrated and momentum-driven Japan rally where foreign investors have crowded into the same narrow group of liquid stocks for an extended period.
"When that reverses ... this tends to be what happens. The exporters have been hit first, and now everything else is following as risk is being flattened aggressively. It will take some time for this to play out.
JAMES SALTER, CIO AND MANAGER, ZENNOR JAPAN FUND, LONDON
"We have been warning that a stronger yen currency would initially cause indices to fall. What has been more difficult to gauge is the extent of the yen carry trade. The recent stock market losers have included banks, insurance, autos and technology companies. These are all overcrowded trades that have seen foreigner’s pile into.
"A stronger yen seems likely. This will lead to a bifurcated market where I suspect the "winners" of the last year bounce short-term but thereafter struggle. Many of these names are yen sensitive and exposed to the global economic cycle.
"Our portfolio, however, remains very domestically orientated. We will nibble at some existing names that have pulled back but are cognisant that the deleveraging may have further to go."
SAISUKE SAKAI, SENIOR ECONOMIST, MIZUHO RESEARCH & TECHNOLOGIES
"From an economist point of view, U.S. and Japan economies aren't that bad now and the fall seems to be a quick correction of stock and currency markets that had been swollen by overseas investors. But this could cause a so-called "negative wealth effect" on Japan's household spending that could delay the consumption-led, wage growth-driven recovery scenario by crushing retail investors' confidence."
"Younger Japanese people who just started investing this year with the introduction of New NISA (tax-free scheme) saw their Nikkei gains wiped off in the past couple of days. Younger generations are also vulnerable to the BOJ hike's mortgage impacts and may further get discouraged by the gloomier prospects shown in the stock prices."
TRAVIS LUNDY, ANALYST, QUIDDITY ADVISORS, HONG KONG
"The fall in stock prices appears to be significantly driven by position unwinding, causing further price falls, causing cascading unwinding. Today reportedly saw lots of margin calls.
"The BOJ hiked rates on Wednesday and stocks - especially bank stocks - were up. Stocks fell on Thursday after the Ueda-san press conference moved USDJPY further but bank stocks did not fall. They were again up in USD terms. The really big move started Friday and then cascaded into Monday based on weak markets overnight and further USDJPY move.
"This appears to be a perfect storm of "risk off" related to Japan. Much less about the BOJ. Much more about tolerance for pain ahead of what was supposed to be a slow summer break."
KYLE RODDA, SENIOR FINANCIAL MARKET ANALYST, CAPITAL.COM, MELBOURNE
"The markets are in meltdown and it's a sea of red across the world. The rapid move in the yen is putting downward pressure on Japanese equities, but it's also driving an unwind of a major carry trade - investors had leveraged up by borrowing in yen to buy other assets, chiefly U.S. tech stocks.
We are basically seeing a mass deleveraging as investors sell assets to fund their losses. The rapidity of the move has caught a lot of investors off guard; there's a lot of panic selling now, which is what causes these non-linear reactions in asset prices to pretty straightforward fundamental dynamics."
Reporting by Reuters bureaus in Asia; Editing by Himani Sarkar
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