Markets

Nikkei slides as prolonged oil slump undermines risk appetite

Reuters Tokyo | Updated on January 24, 2018 Published on January 14, 2015

Japan’s Nikkei share average fell 1.1 per cent on Wednesday, with oil-related shares leading the losses as plummeting oil prices showed no sign of abating on worries about the global economic outlook.

The Nikkei fell 196 points to 16,891.96. Although it managed to stay above Tuesday’s low, it has slipped below an important support from the Ichimoku cloud top, which comes in around 17,033, for the first time since the Bank of Japan’s surprise policy easing on October 31.

“At the moment, the market is focusing on the negative side of plunging oil prices, like their impact on oil producing countries and credit products,’’ said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.

Oil price slump

While cheaper oil prices help consumers in many oil-importing economies, such as Japan, investors are more worried about their impact on various oil producers as oil prices more than halved in just over six months to near six-year lows.

Oil-related shares led the losses, with JX Holdings falling 2.6 per cent in heavy trade. Showa Shell shed 2.9 per cent.

Shares in trading companies, considered as resource plays because of their heavy investments in energy and other raw materials, were also under pressure. Mitsui Co Ltd fell 1.5 per cent.

Bargain-hunting

Investors are likely to start bargain-hunting only after they will be convinced that oil prices have hit a bottom, market players also said.

Uncertainty over Greece’s election later this month also suggests the market may remain capped for now, they added.

Yen rebounds

The yen’s rebound to a one-month high hurt some currency-sensitive exporters’ shares, with automaker Mazda falling 1.5 per cent.

Still, the overall impact of the yen’s move was muted with many exporters outperforming the market as many investors see the yen’s gains as a natural correction after its sharp fall late last year.

The yen rose to as high as 117.495 to the dollar from a 7 1/2-year low of 121.86 hit in early December.

Even at the current levels, the yen is more than 12 per cent cheaper than a year ago and compared with just three months ago, it is weaker by more than 8 per cent, meaning many exporters look set to boost profits.

The broader Topix fell 0.8 per cent, while the JPX-Nikkei Index 400 shed 0.7 per cent.

Published on January 14, 2015
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