Japan’s Topix, Nikkei stock gauges tumble almost 20% from peaks
The Topix and Nikkei 225 Stock Average fell about 5%, with the former set for a three-day decline that would be the worst since the 2011 Fukushima nuclear meltdown and put them near bear markets. A circuit breaker halted trading of Topix futures for about 10 minutes.
Exporters were among the heaviest drags on the Topix after the yen surged more than 1% versus the dollar on the unwinding of carry trades, while banks dropped after yields of 10-year government bonds plunged 13 basis points.
“We are basically seeing a mass deleveraging as investors sell assets to fund their losses,” said Kyle Rodda, a senior market analyst at Capital.Com. “The rapidity of the move has caught me off guard; there’s a lot of panic selling now, which is what causes these non-linear reactions in asset prices to pretty straightforward fundamental dynamics.”
All 33 of its industry groups have fallen since the Bank of Japan raised interest rates on July 31, triggering a surge in the yen that has cast a pall over the earnings outlook for exporters. Yen-funded carry trades were among the most popular in emerging markets as volatility remained low and investors bet Japanese rates would remain at rock bottom.
Even insurers and banks that were expected to benefit from higher rates are now some of the biggest losers since the BOJ’s hike as global equity markets slump. Mitsubishi UFJ Financial Group shares fell as much as 21%, their biggest intraday decline on record, as yields plunged globally following poor US data.
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