Japan's Stocks Drop on Credit Concern; Nomura Falls

By Masaki Kondo

(Corrects T&D Holdings name in second paragraph.)

Aug. 19 (Bloomberg) -- Japan's stocks fell the first time in three days on speculation the U.S. government will bail out the country's biggest mortgage-finance companies, rekindling concern turbulence in global financial markets will linger.

Nomura Holdings Inc., Japan's biggest brokerage, slumped 2.8 percent and insurer T&D Holdings Inc. sank to the lowest in more than four months after Barron's said the Bush administration expects Fannie Mae and Freddie Mac will need to be rescued. Mitsubishi UFJ Financial Group Inc. declined 2.6 percent after raising its bid to buy the rest of UnionBanCal Corp.

``The nationalization of Fannie Mae and Freddie Mac seems to be drawing near,'' Mamoru Shimode, Tokyo-based chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. ``Japan's financial stocks are usually sold off when news like this appears.''

The Nikkei 225 Stock Average declined 317.91, or 2.4 percent, to 12,847.54 as of 9:32 a.m. in Tokyo. The broader Topix index fell 31.21, or 2.5 percent, to 1,232.54. All 33 industry groups on the Topix fell.

The U.S. government plans to recapitalize Fannie and Freddie should their capital raising fail, Barron's said, citing a person in the Bush administration it didn't identify. A rescue of the companies, which own or guarantee 42 percent of the $12 trillion in U.S. home loans, would wipe out common stockholders, Barron's reported. Shares in the lenders fell the most in almost two decades, sending U.S. stocks down the most in more than a week.

UnionBanCal Bid

The collapse of the U.S. mortgage market has sparked more than $500 billion in asset writedowns and credit losses at global financial companies.

Nomura sank 2.8 percent to 1,481 yen, while T&D, the nation's second-largest publicly traded insurer, plunged 4.6 percent to 5,410 yen, the lowest since April. Resona Holdings Inc., Japan's fourth-largest bank by value, dived 2.4 percent to 130,500 yen. Orix Corp., the nation's biggest non-bank financial company, lost 4.8 percent to 13,170 yen.

Mitsubishi UFJ, Japan's biggest publicly traded bank, dropped 2.6 percent to 823 yen after raising its bid for UnionBanCal by 17 percent to $3.5 billion to gain full control of the California lender. The Japanese bank announced the offer after Japanese markets shut yesterday.

Nikkei futures expiring in September retreated 2.4 percent to 12,850 in Osaka and slumped by the same degree to 12,845 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.