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So, Fitch junked Sharp (to ‘B-’ from ‘BBB-’) and the century-old technology company admitted there is “material doubt” about its ability to stay in business. According to the FT, it expects to end the financial year to March with a net loss of Y450bn ($5.6bn), worse than the Y250bn loss it had predicted in August. Last year it lost Y396bn.
And one line in the rating agency’s critique really stuck out:
Fitch does not foresee any meaningful operational turnaround in the company’s core business over the short- to medium-term due to deterioration in its market position as well as in price competitiveness as a result of a high Japanese yen.
Markets in Asia were apparently very skittish earlier today in partdue to fears that earnings could be affected by tensions between Japan and China over the Senkaku/Diaoyu islands. This in turn was no doubt exacerbated by the news that not only are the big four Chinese banks skipping this week’s IMF meeting in Tokyo, but the PBoC governor and the finance minister are also sitting it out, instead sending along their respective deputies.
From Bloomberg: Read more
Asian equities rose on Monday and safe-haven assets such as gold and the Swiss franc fell, but investors remained cautious in picking up bargains. Better than expected GDP data from Japan helped boost the Nikkei Stock Average 1.2 per cent, says the WSJ. The economy contracted 0.3 per cent in the July quarter, but this was less than economists had forecast. The MSCI Asia Pacific Index rose 1.2 per cent by midday in Tokyo, Toyota climbing 2.6 per cent, says Bloomberg. The Hang Seng rose 1.9 per cent, Australia’s S&P/ASX 200 gained 1.8 per cent, with miner BHP Billiton gaining 3.6 per cent, and the Taiex Index added 1.7 per cent in Taipei. A modest 0.4 per cent rise in US stock futures also encouraged some bargain hunting in Asian markets but Reuters reports that on a valuation basis, the MSCI index of Asia stocks outside Japan trades at 11.5 times forward 12-month earnings, above the 7.9 times seen during the depths of the 2008 financial crisis, suggesting investors may still not be in a hurry to buy despite the 13 per cent decline over the last two weeks. Read more
European bourses are breaking a five-day losing streak after the Tokyo stock market rallied nearly 6 per cent in the belief that recent selling had been overdone, the FT reports in its rolling global market overview. “Bargain hunters” have moved back into many riskier assets following a two-session tumble on Japanese nuclear fallout fears that had seen global equities shed about $1,600bn. See also FT Alphaville on Japan’s Wednesday bounce, and for a look at who’s been selling Japanese stocks. Read more
Japan has defied investor logic even more than usual in the past few days.
Even as the sense of crisis deepened around Japan’s stricken Fukushima nuclear plant, with reports of a fresh fire and radioactive leaks, stocks bounced back some on Wednesday, with the Nikkei 225 Stock Average closing up nearly 6 per cent. Read more
In addition to being big Japanese government-bond buyers, Japan’s megabanks are also (wait for it) heavily invested in equities. Though not as much as they used to be.
There’s a slightly ironic backstory here that has to do with Japan’s very long banking crisis. During the bubble years, Japanese banks rushed to invest in the country’s booming stock market — often booking any share price gains as ‘unrealised gains’ or ‘hidden reserves’ that fed into their regulatory capital. Once the market crashed, the banks posted huge equity losses. The financials subsequently cut down on their share holdings (relatively) and Japan’s regulators reacted with some new rules. Read more
Think your FTSE 100 equity Exchange-Traded Fund (ETF) investment guarantees you exact FTSE 100 returns, minus fees? In the event of failure, not always, reports FT Alphaville on Monday. European legislation, in fact, allows for ETFs to be backed by extremely diverse collateral, not always reflecting the underlying index being tracked, and which can even include mortgage or asset backed securities. Read more