Most Japan Stocks Fall on Urban Bankruptcy; Shipping Lines Gain

By Patrick Rial
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Aug. 14 (Bloomberg) -- Most Japanese stocks slumped after Urban Corp. became the largest Japanese company to file for bankruptcy this year and Merrill Lynch & Co. said the global credit crisis is far from over.

Urban was poised to fall by 48 percent after defaulting on $2.35 billion in debt, leading property developers lower. Kawasaki Kisen Kaisha Ltd. led a gauge of shipping lines to their biggest gain in five months after cargo fees rose for the first time in 23 days. Mitsui & Co., Japan's second-biggest trading company rose after commodities had their biggest gain since June.

``Japan's property market experienced its own mini-bubble where enthusiasm got overheated, but now the failures have started, and there's still more bad news to come,'' said Hideyuki Ookoshi, who helps oversee $365 million at Chiba-Gin Asset Management Co. ``People are looking to pick up oversold commodities shares and shippers on their longer-term outlook.''

The Nikkei 225 Stock Average slipped 24.16, or 0.2 percent, to 12,998.89 as of 10:40 a.m. in Tokyo, after rising as much as 0.5 percent. The broader Topix index lost 3.73, or 0.3 percent, to 1,242.75. Three shares retreated for every two that rose on the Topix.

Urban shares were offered lower by 30 yen, or 48 percent, to 32 yen after it became the latest in a string of real estate companies to declare bankruptcy in recent months. Banks have been cutting off funding to developers with overextended balance sheets and poor management, according to Nobuo Tomoda, an analyst at credit research firm Tokyo Shoko Research Ltd.

`Far From Over'

Financial shares led a 0.3 percent decline in the Standard & Poor's 500 Index yesterday after Merrill's Chief Equity strategist Richard Bernstein said buying bank shares at the current time is risky as ``the problems in the financial sector appear to us to be far from over.'' The credit crisis is not limited to U.S. banks with subprime loan-related securities, he added in a note to clients.

Mitsui Fudosan, the nation's biggest developer, slipped 2.4 percent to 2,265 yen. NTT Urban Development Co., which manages property for the nation's largest telephone company, slumped 6.1 percent to 144,200 yen. Kenedix Inc., a real estate investment manager, tumbled 7.6 percent to 52,600 yen after reporting a 45 percent decline in first-half net income.

``Urban's bankruptcy filing may cause a sudden surge in nervousness about the financial system and spark worries about a chain reaction of developer failures,'' Mitsushige Akino, who oversees the equivalent of $468 million at Ichiyoshi Investment Management Co. in Tokyo., said in a Bloomberg Television interview.

Kansai Urban Banking Corp. plunged 10 percent to 152 yen after the company said it may not be able to recover a 6 billion yen ($55 million) loan to Urban Corp. Hiroshima Bank Ltd. lost 2.2 percent to 399 yen after lowering its profit forecast to write off loans that may not be recoverable from the failed developer.

Baltic Dry

Kawasaki Kisen added 3.8 percent to 762 yen. Mitsui O.S.K. Lines Ltd., the nation's second-biggest bulk shipper, jumped 3.9 percent to 1,283 yen. A gauge of shipping companies rose the most since March 25.

The Baltic Dry Index, a measure of freight costs, climbed 1.5 percent yesterday, breaking a 23-day losing streak that was the longest losing run in three years.

Mitsui & Co., which generates more than half its profit from commodities trading, jumped 4.1 percent to 1,837 yen. Inpex Holdings Inc., Japan's biggest oil explorer, rose 2.7 percent to 1.1 million yen.

Crude oil rose 2.6 percent to $116 a barrel in New York, the biggest one-day gain since July 30, after a U.S. Energy Department report showed a bigger-than-forecast decline in inventories of gasoline. Prices for metals including copper, gold and nickel also surged, sending the Reuters/Jefferies CRB Index of 19 commodities to its biggest one-day gain since June.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.