By Masaki Kondo
April 21 (Bloomberg) -- Japanese stocks slumped the most this month after an increase in reserves at Bank of America Corp. renewed concern credit losses will swell at lenders.
Sumitomo Mitsui Financial Group Inc., Japan’s No. 3 listed bank, fell 2.8 percent after Bank of America’s results sparked the biggest drop in U.S. stocks in seven weeks. Sony Corp., which gets a quarter of its sales from the U.S., retreated 5.8 percent as Nikko Citigroup Ltd. cut its rating on the company to “hold,” and after the yen strengthened. Mitsui & Co., a trading house that gets more than half its profit from commodities, lost 5.7 percent after oil and metals prices fell.
The Nikkei 225 Stock Average declined 263.93, or 3 percent, to 8,660.82 as of 9:39 a.m. in Tokyo, set for the sharpest drop since March 30. The broader Topix index fell 22.41, or 2.6 percent, to 825.89.
“People have focused too much on the bright side of news coming out, and it’s high time to correct this excess optimism,” Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion, said in an interview with Bloomberg Television.
In New York, the Standard & Poor’s 500 Index slid 4.3 percent, the most since March 2, led by financial companies, after Bank of America said it increased reserves for future loan losses by 57 percent since the end of December.
Sumitomo Mitsui dived 2.8 percent to 2,945 yen, and market leader Mitsubishi UFJ Financial Group Inc. lost 2.6 percent to 483 yen. Orix Corp., the nation’s largest non-bank financial company, slid 5.7 percent to 4,480 yen after Nomura Holdings Inc. lowered its rating on the stock to “neutral” from “buy.”
‘Ambiguous Hope’
The Nikkei has risen by more than a quarter from a 26-year low on March 10 amid speculation the worst of the global recession has passed. The gauge’s members yesterday traded at 220 times their estimated net income for this fiscal year, according to index compiler Nikkei Inc., the highest level since January 2002.
“There is little chance to win if investors bet on ambiguous hope the economy will recover,” Norihiro Fujito, senior investment strategist at Tokyo-based Mitsubishi UFJ Securities Co., wrote in a Japanese-language report yesterday. “It’s hard to ignore that shares have become more expensive from a valuation standpoint.”
Prospects for more bank losses spurred demand for the yen as an investment haven. The Japanese currency touched 97.66, a level not seen since March 31, compared with 98.89 at the close of stock trading in Tokyo yesterday. A stronger local currency diminishes the value of overseas sales for Japanese companies.
Sony, Nissan
Sony, the world’s second-biggest maker of consumer electronics, declined 5.8 percent to 2,500 yen as Nikko Citigroup reduced Sony from “buy,” saying an earnings recovery will take time. Canon Inc., which gets a third of its sales from the Americas, slid 5.2 percent to 2,930 yen. Nissan Motor Co., Japan’s No. 3 automaker, dropped 4.2 percent to 480 yen.
Mitsui, Japan’s second-biggest trading house by market value, dived 5.7 percent to 1,124 yen. Bigger competitor Mitsubishi Corp. slid 5.6 percent to 1,586 yen, while Itochu Corp. fell 5.2 percent to 549 yen.
Crude oil for May delivery dived 8.8 percent to $45.88 a barrel in New York yesterday, the lowest settlement since March 11. Copper futures for July delivery slid 4.2 percent, the sharpest plunge since Feb. 17. Oil and copper extended declines today.
Mitsubishi may have a 100 billion-yen ($1.02 billion) drop in net income for the year to March 2010 because of falling prices for coking coal, the Nikkei newspaper said today. Mitsui and Itochu may also see lower coal prices hurt their profits by 10 billion yen to 30 billion yen, Nikkei said.
Nikkei futures expiring in June retreated 3 percent to 8,660 in Osaka and slumped 3.1 percent to 8,660 in Singapore.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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