Japanese Stocks Tumble in Biggest Weekly Drop; Nikkei Plunges

By Masaki Kondo

Oct. 10 (Bloomberg) -- Japan stocks plunged, capping the Nikkei 225 Average's biggest weekly decline in its more than 50- year history, as the deepening credit crisis stoked concern that company failures will increase.

The tumble triggered a suspension in futures trading. Mitsubishi UFJ Financial Group Inc. slumped 8.5 percent, leading declines among banks, after Moody's Investors Service said it may cut Morgan Stanley's credit rating. Mitsubishi Estate Co., Japan's second-biggest property developer, retreated 8.1 percent, while T&D Holdings Inc., the country's largest publicly traded life insurer, dropped 11 percent after a real-estate investment trust and an insurer filed for bankruptcy protection.

``I've lost my appetite and my weight has decreased by 3 kilograms so far this year,'' said Seiichiro Iwamoto, who oversees the equivalent of $1 billion at Mizuho Asset Management Co. in Tokyo. ``I have to get myself ready for an even worse incident such as the collapse of a bigger company.''

The Nikkei 225 Stock Average fell 881.06, or 9.6 percent, to close at 8,276.43 in Tokyo. The broader Topix index retreated 64.25, or 7.1 percent, to 840.86. The Nikkei slumped 24 percent this week, the steepest decline in the history of its data that extends back to 1949. The Topix, begun in 1969, tumbled 20 percent, also its worst week on record.

The Osaka Securities Exchange and Tokyo Stock Exchange halted trading in Nikkei 225 Stock Average and Topix futures for 15 minutes in the morning session.

Housing Slump

A U.S. housing slump and subsequent crash in investments tied to the country's mortgage industry has locked up credit markets as banks reined in lending. The London interbank offered rate for three-month loans rose to the highest since Dec. 28. The so-called Libor is the most widely used benchmark for short- term interest rates.

Mitsubishi UFJ, Japan's largest listed bank, dropped 8.5 percent to 710 yen, while Mizuho Financial Group Inc., the second biggest, slid 12 percent to 330,000 yen. Sumitomo Mitsui Financial Group Inc. fell 8.2 percent to 552,000 yen.

Mizuho has declared $6.8 billion of losses tied to U.S. mortgage investments, while Mitsubishi UFJ, which agreed to buy 20 percent of Morgan Stanley, lost $1.7 billion. Sumitomo Mitsui has posted $1 billion in losses.

Moody's put Morgan Stanley's A1 long-term credit rating on review for a possible downgrade, saying that the slump in financial markets may hurt profit next year, according to a statement. The ratings assessor also lowered its outlook for Goldman Sachs Group Inc.'s Aa3 long-term rating to negative.

`Capitulation and Panic'

``It's certainly capitulation and panic mode,'' said John Vail, who helps oversee about $106 billion as head of global strategy at Nikko Asset Management Co. ``It's dark in the U.S. much like it was dark in Japan in the late 90s. The U.S. is having a taste of that bitter chalice.''

Surging costs to dispose of non-performing assets prompted UBS AG to lower its ratings on Mizuho and Chuo Mitsui Trust Holdings Inc. to ``neutral'' from ``buy.'' Analyst Nana Otsuki also cut 12-month price estimates for Mitsubishi UFJ and Sumitomo Mitsui by as much as 33 percent.

Mitsubishi Estate lost 8.1 percent to 1,642 yen. Mitsui Fudosan Co., the nation's largest real-estate company, slid 6.8 percent to 1,575 yen. Sumitomo Realty & Development Co. dived 5.9 percent to 1,779 yen.

New City Residence Investment Corp. filed for bankruptcy protection, becoming the country's first real-estate investment trust failure. Yamato Life Insurance Co. also filed for court protection from creditors in the nation's first bankruptcy in the industry in seven years.

Bankruptcies

T&D Holdings lost 11 percent to 4,220 yen, and Tokio Marine Holdings Inc. fell 11 percent to 3,100 yen. Fuji Fire and Marine Insurance Co. dropped 22 percent to 163 yen, the sharpest decline in more than two decades.

Some shares gained as investors bet recent declines were overdone. About 80 percent of shares on the Topix traded below book value, indicating the liquidation value of assets is greater than the company's ongoing business.

Nintendo Co., the world's biggest maker of handheld game players, added 4.6 percent to 36,600 yen in Osaka trading, and Mitsubishi Corp., Japan's largest trading company, jumped 3.2 percent to 1,720 yen. Kawasaki Heavy Industries Ltd. rose 4.9 percent to 170 yen.

``Regardless of however good they are, shares, especially small caps, are trading with a huge discount and they look very attractive to me,'' said Mizuho Asset's Iwamoto. ``I'm bargain- hunting those stocks that deal in the Internet, financial services and retailing.''

Nikkei futures expiring in December retreated 11 percent to 8,170 in Osaka and slumped 12 percent to 8,165 in Singapore.

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