Japan's Nikkei closes at one-month low on concerns over new virus emergency period

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20 April 2021

Tokyo stocks closed lower Tuesday, with the benchmark Nikkei stock index sinking to a one-month low on concerns that surging virus cases in Japan could lead to stricter business restrictions in urban areas and the slowing of the economic recovery, APA reports citing Xinhuanet.

The 225-issue Nikkei Stock Average dropped 584.99 points, or 1.97 percent, from Monday to close the day at 29,100.38, marking its lowest closing level since March 25.

The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, lost 30.31 points, or 1.55 percent, to finish at 1,926.25.

Local brokers said the majority of sectors retreated into negative territory as investor sentiment was dented from the get-go by the likelihood that the western prefecture of Osaka may soon be put under a prefecture-specific state of emergency by the central government.

They added that the flight from riskier assets including stocks saw investors pile into the Japanese yen, perceived as a safe-haven currency, which drives its value up versus its major counterparts including the U.S. dollar, which negatively impacts Japanese exporters which are typically reliant on a weaker yen to boost profits made overseas.

Along with concerns over a third state of emergency being declared for Osaka, the market is also bracing for a similar measure to be taken by Tokyo later in the week, which could significantly impact the pace of Japan's recovery from the pandemic and hit companies' earnings outlooks for the current business year, traders said.

"Some overseas speculators sold Japanese shares on worries about a virus resurgence and a slowdown of the economic recovery due to an emergency declaration," Toshikazu Horiuchi, equity strategist at IwaiCosmo Securities Co., was quoted as saying.

From a broader perspective, some investment analysts said that COVID-19 concerns stemmed beyond just Japan but firms here would still be subjected to external downside effects due to their exposure to global markets.

"There is a concern about virus resurgence not only in Japan but also in other countries. Investors are becoming cautious about an economic reopening, particularly since many Japanese companies are sensitive to the global economy," Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities, was quoted as saying.

By the close of play, all industry categories lost ground, with the exception of marine transportation issues, with air transportation, real estate and machinery issues comprising those that declined the most.

Nikkei heavyweights dragged down the broader market, with SoftBank Group dropping 1.8 percent and Fast Retailing, operator of the Uniqlo chain of casual clothing stores, ending the day 2.2 percent lower.

Major metropolises possibly facing fresh COVID-19 emergency periods sent travel and transportation issues lower, on concerns over increased restrictions being imposed on people's movements as well as on companies.

Specifically, the possibility that Osaka may call for certain businesses to temporarily suspend their operations, soured the market mood, dealers here said.

As a result, Japan Airlines fell 3.0 percent, while travel agency H.I.S. relinquished 1.6 percent by the close.

Similarly, department store operators were offloaded due to fears of falling patronage if new restrictions are imposed and people requested to stay at home, particularly over the upcoming Golden Week string of national holidays.

Isetan Mitsukoshi Holdings slumped 4.0 percent, while Marui Group ended the day 5.8 percent lower.

Real estate issues came under pressure as a state of emergency declaration in a major prefectures like Osaka and Tokyo among others would likely see more people requested to work from home, further stifling demand for office space.

Tokyu Fudosan Holdings lost 2.8 percent, while Mitsubishi Estate fell 2.1 percent. Mitsui Fudosan, meanwhile, closed 3.2 percent lower.

Chip-linked issues were dragged down by their U.S. peers dropping overnight, with Tokyo Electron losing 2.3 percent, Murata Manufacturing going down 1.6 percent and Advantest falling 3.2 percent.

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