Japanese Stocks Fall on Concerns Over Bank Health, China Policy

By Patrick Rial

Oct. 22 (Bloomberg) -- Japanese stocks fell, led by financial companies on renewed concern banks will be slow to recover from the recession.

Sumitomo Mitsui Financial Group Inc., Japan’s second- largest lender by market value, lost 2.7 percent. Mitsubishi UFJ Financial Group Inc., the biggest, sank 3.1 percent. Dick Bove, an analyst at Rochdale Securities LLC, cut his rating on Wells Fargo & Co. yesterday on concern loan losses may be accelerating, sending U.S. bank shares tumbling. Mitsui O.S.K. Lines Ltd., the world’s largest merchant-fleet operator, slid 2.4 percent amid concern China will tighten monetary policy after economic growth accelerated to the highest level in a year.

“I’m sticking with my bearish stance -- investors have become too optimistic,” said Tomokatsu Mori, an equities manager at Fukoku Mutual Life Insurance Co., which manages about $61 billion in assets. “The financial system is broken and they’re trying to convince everyone that it’s not.”

The Nikkei 225 Stock Average dropped 0.6 percent to 10,267.17 at the close of trading in Tokyo. The broader Topix index declined 0.6 percent to 908.60, with about two shares retreating for each that advanced. Both indexes pared losses late in the day after quarterly earnings from Credit Suisse Group AG and Hyundai Motor Co. topped estimates.

Japanese exports dropped 30.7 percent from a year earlier, compared with a 36 percent decline in August, the Finance Ministry said today in Tokyo. The drop was larger than economists had forecast.

China Data

Data today from China, Japan’s largest export market, showed the nation’s economic expansion accelerated to an 8.9 percent pace in the third quarter, fueled by a boom in lending, while industrial production increased 13.9 percent in September. The fastest economic growth in a year spurred concern the government will tighten monetary policy.

“China looks like it’s the one economy that’s emerging from the recession and it’s due to the government throwing money around,” said Fukoku’s Mori.

In New York yesterday, the Standard & Poor’s 500 Index slumped in the final hour of trading, losing 0.9 percent. Wells Fargo reported a record quarterly profit yesterday, which Rochdale’s Bove said belies the company’s true condition.

“Most disturbing is that loan losses seem to be accelerating on the negative side,” Bove said in a report, cutting his investment rating on the shares to “sell.”

Sumitomo Mitsui lost 2.7 percent to 3,220 yen today. Nomura Holdings Inc., Japan’s largest brokerage, sank 2.9 percent to 664 yen. Mitsubishi UFJ lost 3.1 percent to 472 yen.

Shipping Companies

The Topix has advanced 5.7 percent this year, lagging gains of 20 percent by the S&P 500 and 26 percent for the Dow Jones Stoxx 600 Index in Europe, as a stronger yen and decreased global capital spending crimped profits at Japanese companies. Shares in the Japanese benchmark trade at 39 times estimated earnings, higher than shares in the U.S. and Europe.

Mitsui O.S.K. declined 2.4 percent to 565 yen. Nippon Yusen K.K., Japan’s No. 1 shipping line by sales, sank 3 percent to 359 yen. Shipping companies as a group had the steepest drop among the Topix’s 33 industries.

KDDI Corp., Japan’s second-largest mobile-phone operator, lost 4 percent to 484,000 yen, the biggest decline in the Nikkei. The shares were cut to “hold” from “buy” by Hiroshi Yamashina at Citigroup Inc. The company’s handsets aren’t becoming more competitive and it needs to improve profitability in its fixed-line business, he wrote in a report.

Sankyu Inc., a logistics and plant engineering company, jumped 5.4 percent after saying in a preliminary report yesterday first-half profit exceeded the company’s original estimate by 21 percent.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.