By Masaki Kondo and Toshiro Hasegawa
Feb. 20 (Bloomberg) -- Japanese stocks slumped, sending the Topix index to its lowest close in a quarter century, as Bridgestone Corp.’s forecast rekindled concern the slump in corporate earnings will deepen.
Bridgestone, the world’s No. 1 tiremaker, sank 7.4 percent after saying profit will fall by more than two-thirds this year. Elpida Memory Inc. plunged 15 percent after its debt rating was cut and chip-equipment orders in North America dropped to the lowest since 1991. T&D Holdings Inc., Japan’s largest listed life insurer, leapt 12 percent even after saying it will sell shares.
“Before, investors dumped stocks in a panic. Now, they’re coolly selling equities in step with worsening company earnings,” Taro Toyoshima, chief portfolio manager at Tokyo- based Nissay Asset Management Corp., which oversees the equivalent of $379 million. “We can’t expect any positive surprises to emerge from Japan.”
The Nikkei 225 Stock Average declined 141.27, or 1.9 percent, to close at 7,416.38 in Tokyo, losing 4.7 percent on the week. The broader Topix index fell 12.06, or 1.6 percent, to 739.53, breaking through a previous trough in October to close at the lowest since Jan. 5, 1984. The Topix lost 3.3 percent this week.
The Nikkei has slumped 16 percent this year as government and central bank measures to revive growth failed to quell concern the recession will deepen and further erode company earnings. Gross domestic product shrank an annualized 12.7 percent last quarter, the sharpest since the 1974 oil crisis.
Companies on the Nikkei traded at 68.9 times estimated net income for this fiscal year as of yesterday, near the highest level since May 2003, as companies from Toyota Motor Corp. to Sony Corp. reversed full-year forecasts to net losses. The benchmark index is 253 points, or 3.4 percent, away from a 26- year low.
Industry Contraction
Bridgestone declined 7.4 percent to 1,251 yen, driving a gauge of peers to the biggest drop among the Topix’s 33 industry groups. The tiremaker yesterday said net income will probably fall 71 percent to 3 billion yen ($32 million) this year as demand for new cars wanes and a stronger local currency reduces the value of overseas sales. Rival Toyo Tire & Rubber Co. plunged 8.5 percent to 108 yen, the lowest since at least September 1974.
Elpida, Japan’s largest memory-chip maker, sank 15 percent to 512 yen, the steepest decline since Oct. 28. Standard & Poor’s yesterday reduced its long-term debt rating on the chipmaker by one level to B+, four steps below investment grade, as the company’s short-term liquidity may be at risk.
Rival Toshiba Corp. lost 6.1 percent to 230 yen. Hitachi Ltd., which controls closely held chipmaker Renesas Technology Corp., slid 5.9 percent to 241 yen. Orders for semiconductor equipment dropped by three-quarters in North America last month to the lowest level since 1991 as chipmakers gave up on plans to expand output.
Share Sale
The domestic computer-chip industry continued to shrink last month, a preliminary report from the Semiconductor Equipment Association of Japan showed on Feb. 18.
T&D jumped 12 percent to 2,200 yen, the sharpest gain since Nov. 21 and leading gains on the Nikkei. The company yesterday announced its plan to sell shares valued at as much as 54 billion yen to shore up capital. Nikko Citigroup Ltd. raised its rating on T&D and recommended buying the insurer’s shares, saying dilution concerns had been excessive.
“Raising capital in this crisis requires strong confidence from investors that a company won’t collapse,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees about $3.3 billion. “Despite dilution risk, selling new shares is good news.”
Nikkei futures expiring in March retreated 2.5 percent to 7,380 in Osaka and slid 2.4 percent to 7,385 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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