Japan’s Topix Declines Most in 3 Months on Nomura’s Share Sale

By Masaki Kondo

Sept. 25 (Bloomberg) -- Japanese stocks sank, sending the Topix index to its biggest slide in three months, after Nomura Holdings Inc. said it will sell new shares and as the Group of 20 nations discuss tighter capital requirements for banks.

Nomura, Japan’s largest brokerage, tumbled 16 percent after announcing the issuance of stock that will dilute existing share value by about 30 percent. Mizuho Financial Group Inc. slumped 4.4 percent amid concern bad loans are increasing at banks. Japan Airlines Corp. dived 7.6 percent after its turnaround plan failed to satisfy the government. K.K. daVinci Holdings tumbled 10 percent on speculation the company can’t repay a loan.

“There is no bright spot in the financial industry as losses on non-performing loans will likely stay high,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages the equivalent of $14 billion. “Even if banks increase capital to comply with tighter regulations, they may not get sufficient returns.”

The Nikkei 225 Stock Average slid 2.6 percent to close at 10,265.98 in Tokyo. The broader Topix index lost 2.9 percent to 922.67, the sharpest dive since June 16. Eight stocks dropped for each that rose and all industry groups on the Topix fell.

For this holiday-shortened week, the Nikkei dropped 1 percent, while the broader index lost 1.8 percent. Markets were shut Sept. 21 through Sept. 23.

Yesterday was the last day investors could get rights to dividends for some shares that will be paid on Oct. 1, according to Joinvest Securities Co., a subsidiary of Nomura.

‘Hanged Man’

Concerns are growing that banks will be saddled with bad loans as consumer lender Aiful Corp. and mobile-phone carrier Willcom Inc. seek to delay debt repayments, while Japan Airlines is asking for a fourth state bailout since 2001. With Japan’s deflation accelerating at a record pace in July, companies’ sales will likely continue to shrink and banks are getting cautious about expanding lending, said Tsutomu Yamada, at kabu.com Securities Co. in Tokyo.

“With non-performing loans increasing, Japan’s financial sector is like a hanged man whose legs are being pulled,” said Yamada. “The industry’s atmosphere is turning unpleasant.”

Nomura tumbled 16 percent to 573 yen, the steepest drop in at least three decades. Mizuho retreated 4.4 percent to 176 yen, while market leader Mitsubishi UFJ Financial Group Inc. dropped 5.4 percent to 493 yen. The two banks, along with No. 3 Sumitomo Mitsui Financial Group Inc., have raised $19 billion by selling shares since the end of December.

G-20 Meeting

Nomura plans to sell a record 511.3 billion yen ($5.6 billion) of stock to fund expansion in the U.S. The Tokyo-based brokerage will offer about 800 million shares, equivalent to almost 30 percent of the stock outstanding, according to documents filed to the Ministry of Finance.

Leaders of G-20 nations are meeting in Pittsburgh, where they are discussing measures to support the global economic recovery. They are also working on policies to require banks to hold more capital in reserve against potential losses and limit bankers’ pay. The two-day session ends today.

Japan Airlines dived 7.6 percent to 133 yen, adding to yesterday’s 16 percent plunge, after the nation’s transport minister said neither he nor banks were satisfied with a turnaround plan offered by the company.

DaVinci tumbled 10 percent to 7,750 yen in Osaka trading, extending its eight-day decline to 47 percent. The company said on Sept. 11 that it will unlikely be able to reach an agreement with creditors by the Sept. 25 deadline to extend a loan secured by a Tokyo building. Hideyuki Shinkai, a fund manager for Norinchukin Trust & Banking Co., said concern the company will default on the loan is causing the stock to decline.

In New York, the S&P 500 slid 1 percent after a report from the National Association of Realtors showed sales of existing U.S. homes dropped 2.7 percent last month, while economists had estimated purchases would increase.

Toyota Motor Corp., which gets 31 percent of its revenue in North America, fell 2.6 percent, and smaller rival Fuji Heavy Industries Ltd. retreated 3.7 percent.

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