By Masaki Kondo and Toshiro Hasegawa
Oct. 7 (Bloomberg) -- Japan's stocks slumped, sending the Nikkei 225 Stock Average to its lowest close in almost five years, as the seizure in credit markets curbed demand for the nation's exports and threatened to worsen the economic slowdown.
Sharp Corp., Japan's biggest maker of liquid-crystal displays, dived 9.3 percent after cutting its earnings forecast. Toyota Motor Corp. tumbled 4.9 percent, giving up its spot as the largest automaker by market value to Volkswagen AG. Mitsui O.S.K. Lines Ltd., the nation's second-biggest shipping company, fell 5.1 percent on concern demand will wane.
``The feedback between the financial world and the real economy is pushing us into uncharted waters,'' said Nobuyuki Kashihara, who helps oversee $26 billion at Mizuho Asset Management Co. in Tokyo. ``Investors couldn't imagine the global economy would fall apart as it has.''
The Nikkei Average fell 317.19, or 3 percent, to close at 10,155.90 in Tokyo after dipping below 10,000 for the first time since Dec. 10, 2003. The broader Topix index dropped 21.44, or 2.2 percent, to 977.61. More than four stocks retreated for each that gained on the gauge.
The Topix has plunged 22 percent since September as credit turmoil caused the failures of banks globally and slumping commodities dragged down raw-materials producers. Seventy percent of stocks on the Topix sank below their book values as of yesterday, while shares on Tokyo Stock Exchange's main board traded at an average 12.7 times earnings, the lowest since Bloomberg started gathering data in July 1989.
Shares pared declines and the yen fell from a three-year high against the euro after Australia cut interest rates by more than expected, spurring speculation more central banks will lower borrowing costs to protect their economies from the credit crunch.
`Rate Cut Talk'
``There's some talk around in the market that there could be a coordinated global interest-rate cut,'' said Simon Bonouvrie, a portfolio manager who helps manage $1.8 billion at Platypus Asset Management in Sydney.
The Reserve Bank of Australia lowered its overnight cash rate target to 6 percent from 7 percent, double the reduction forecast by economists. The Bank of Japan today kept interest rates unchanged at 0.5 percent.
Sharp retreated 9.3 percent, the most since March 2000, to 910 yen. The Osaka-based company yesterday cut its annual net income forecast by 43 percent, citing lower sales of phones and falling prices for displays.
``Sharp has overproduced LCDs though demand wasn't there,'' said Mitsushige Akino, who oversees $468 million at Tokyo-based Ichiyoshi Investment Management Co. Sony Corp. and Panasonic Corp. ``are likely to follow suit and I expect Sony will slash forecasts by a larger degree than Sharp.''
Economic Growth
Toyota dropped 4.9 percent to 3,710 yen, the lowest since March 2004. Mitsubishi Motors Corp., which exports three-quarters of its Japanese production, lost 10 percent to 131 yen. Mazda Motor Corp., which derives more than half its profit from Europe, dived 5.9 percent to 320 yen.
Auto sales fell 27 percent in the U.S. last month as tightening credit and an economic slowdown discouraged buyers, prompting Toyota to offer no-interest loans. In Europe, sales slid 16 percent in August, the biggest monthly drop in nine years.
The central bank's quarterly Tankan survey released last week showed large manufacturers had excess capacity for the first time since 2005. Industrial output dropped at the fastest pace in at least five years in August as shipments fell, pushing the inventory-shipment ratio to the highest level since March 2002.
Morgan Stanley cut its growth forecast for Japan, saying the world's second-biggest economy will contract 0.3 percent in the year to March 2009. The brokerage, which cited reduced capital spending amid a global shortage of credit, had previously forecast 0.4 percent growth.
`No Quick Fix'
Tightening access to credit prompted the Bank of Japan to add 1 trillion yen ($9.7 billion) to the financial system. The central bank has pumped about 23 trillion yen into the system over the past three weeks, the most in at least six years.
``We're seeing the market mechanism stop functioning and investors are pricing stocks without looking at their fundamental values,'' said Ichiyoshi's Akino. ``This situation won't improve any time soon. No quick fix can work.''
Mitsui O.S.K. sank 5.1 percent to 713 yen, and Nippon Yusen K.K. declined 3.5 percent to 551 yen. The Topix Marine Transportation Index has fallen for 10 consecutive days, the longest losing streak since November 1999.
The Baltic Dry Index, a measure of shipping costs for commodities, dipped 0.3 percent in London yesterday, after rising for the first time in 10 sessions.
KDDI Corp., the nation's second-biggest mobile-phone operator, jumped 3.4 percent to 610,000 yen, making it one of the 49 winners on the Nikkei. Hitoshi Hayakawa, a Tokyo-based analyst for Credit Suisse Group, said investors favor so-called defensive stocks such as KDDI in a bearish market.
Nikkei futures expiring in December lost 2.3 percent to 10,210 in Osaka and slumped 3.1 percent to 10,165 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.
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