Japan Stocks Drop After Tankan Survey Shows Confidence Waning

Dec. 14 -- Japanese stocks dropped after the Bank of Japan's quarterly Tankan survey showed business confidence fell more than economists had estimated.

Mitsubishi Estate Co. led losses by property developers after the industry reported the largest decline in confidence among non-manufacturers in the survey.

``The Tankan shows that things are getting somewhat worse,'' said Hiroyoshi Nakagawa, who helps oversee about $1 billion in Asian equities at Societe Generale Asset Management Co. in Tokyo. ``The U.S. soft-landing scenario is looking less likely, which will hit the global economy and in turn Japan. Corporate profit growth is set to drop off.''

The Topix slumped 14.85, or 1 percent, to 1,501.25 at the close of trading in Tokyo, after rising as much as 0.8 percent. The Nikkei 225 Stock Average fell 22.01, or 0.1 percent, to 15,514.51.

For the week, the Topix lost 3.9 percent and the Nikkei dropped 2.8 percent. Both gauges are set to drop this year, ending the longest streak of gains since the ``Bubble Economy'' burst in 1990.

Insurance companies including Millea Holdings Inc. dropped after Tatsuya Kubo, a Tokyo-based analyst at Merrill Lynch & Co., reduced his recommendation on four of them. Losses were limited in the Nikkei 225 as U.S. sales of Nintendo Co.'s Wii game console helped lift parts makers including Mitsumi Electric Co.

Mitsubishi Estate, Japan's biggest property developer by market value, plunged 130 yen, or 4.8 percent, to 2,600, the lowest close since September 2006. Sumitomo Realty & Development Co., the third largest, dropped 145 yen, or 4.7 percent, to 2,965. Mitsui Fudosan Co., the No. 2, declined 125 yen, or 4.8 percent, to 2,505.

Tankan Worsening

A measure of property stocks included in the Topix tumbled 4.5 percent, the worst performance among the 33 industry groups in the benchmark.

The Tankan's index of sentiment among large manufacturers fell to 19 points in December, the lowest since September 2005. Economists had forecast a drop to 21 points. The measure for large non-manufacturers also fell 2 points more than forecast to 16 from 20.

The diffusion index for property companies slid 13 points to 37. That for glass and ceramics makers, which includes housing-related businesses, had the biggest drop among large manufacturers with an 18 point decline.

Taiheiyo Cement Corp., Japan's biggest producer of the building material, tumbled 13 yen, or 4.7 percent, to 265. Daikyo Inc., a condominium builder, slid 26 yen, or 7.5 percent, to 321, tumbling the most since Aug. 17.

Insurer Downgrades

Millea, the nation's biggest property and casualty insurer by market value, lost 170 yen, or 4.5 percent, to 3,590. Sompo Japan Insurance Inc., the third largest, slid 44 yen, or 4.1 percent, to 1,020 after the shares were lowered one notch to ``neutral'' at Merrill. Aioi Insurance Co., another P&C insurer, declined 11 yen, or 1.9 percent, to 560 after it was cut two levels to ``sell'' from ``buy.''

Mitsumi, which makes parts for the Nintendo Wii wireless game controller, jumped 90 yen, or 2.4 percent, to 3,890. Nintendo rose 700 yen, or 1.1 percent, to 65,400 in Osaka. In the U.S., the company sold 981,000 Wii consoles in November, twice as many as its nearest competitor. Nintendo is producing 1.8 million systems a month to keep up with consumer demand.

Mitsubishi UFJ Financial Group Inc., the nation's second- largest lender, dropped 54 yen, or 4.8 percent, to 1,074. HSBC Holdings Plc cut its recommendation on the shares to ``underweight'' from ``overweight,'' citing the company's lack of disclosure regarding securities investments, making it a risky bet.

Morgan Stanley Report

Mizuho Financial Group Inc., Japan's third-largest bank by assets, slid 29,000 yen, or 4.9 percent, to 561,000. Sumitomo Mitsui Financial Group Inc., the No. 4, dropped 27,000 yen, or 3.1 percent, to 857,000. Morgan Stanley lowered its earnings estimates for the three largest listed lenders on the view that a mild recession next year in Japan will keep profit growth low.

Nikkei futures expiring in March rose 0.1 percent to 15,560 in Osaka and fell 0.1 percent to 15,555 in Singapore.

The settlement price for December Nikkei 225 options and futures, also known as the ``special quotation,'' was set at 15,513.61 today. The figure is calculated after all shares in the benchmark begin trading.

Aioi Insurance Co. (8761 JT)
Daikyo Inc. (8840 JT)
Millea Holdings Inc. (8766 JT)
Mitsubishi Estate Co. (8802 JT)
Mitsubishi UFJ Financial Group Inc. (8306 JT)
Mitsumi Electric Co. (6767 JT)
Mitsui Fudosan Co. (8801 JT)
Mizuho Financial Group Inc. (8411 JT)
Nintendo Co. (7974 JO)
Sompo Japan Insurance Inc. (8755 JT)
Sumitomo Mitsui Financial Group Inc. (8316 JT)
Sumitomo Realty & Development Co. (8830 JT)
Taiheiyo Cement Corp. (5233 JT)

The Bank of the South

Bolivarian finance

The IMF can sleep easy

DREAMT up by Venezuela's Hugo Chávez as an alternative to the wicked World Bank and the even more wicked IMF, the Banco del Sur (Bank of the South), which seven South American governments signed up to on December 9th, flatters to deceive. Despite months of talks, there is still no agreement on its capital or its statutes. Rather than a gesture of defiance, the bank looks like an object lesson in why South American unity is so hard.

Mr Chávez conceived it as a political tool of his “Bolivarian revolution”, to free other countries in the region from the yoke of the Bretton Woods institutions. “If we hand it over to the técnicos, then it is already dead,” he said in August. He offered to donate to it up to half of Venezuela's foreign-exchange reserves of $30 billion. This week Venezuelan officials said that they would invite African countries to join.

Such technocrats are exactly the people Brazil insists should staff the bank—if it must be staffed at all. Brazilian diplomats have been unusually frank in revealing their lack of enthusiasm for the new institution. They fear it may give soft, politically driven loans that go unpaid. Brazil already has its own well-endowed development bank, the BNDES, whose lending of 62.5 billion reais ($37 billion) in the 12 months to September was 50% greater than that of the World Bank in the same period.

The Brazilians have gone along with the project only because they feel they cannot remain outside any new South American institution, especially one with money. But they have worked to limit the bank's remit and to slow its creation.

Mr Chávez can count on the vote of Bolivia and maybe that of Ecuador on the bank's board. But other members are likely to side with Brazil—and so will Chile, Colombia and Peru if they join. So expect a modest outfit that mainly finances cross-border infrastructure. The World Bank and the Inter-American Development Bank (not to speak of the Andean Development Corporation) do that already. But competition is a fine thing—even if it is not what Mr Chávez had in mind.