Selling stampede shuts down Tokyo stock
(Reuters)
Updated: 2006-01-18 17:29

The number of transactions had reached about 4 million by 0525 GMT (2:25 p.m.), just before trade was halted.

Individual Investors, Reform Worries

News that the exchange was considering a shut-down accelerated selling across the board, pushing down the Nikkei share average by more than four percent to as low as 15,059.52.

The Nikkei clawed back to finish down 2.94 percent at 15,341.18 but that was still its biggest one-day fall since April 18, 2005, when it fell 3.8 percent. The broader TOPIX index fell 3.49 percent to close at 1,574.67.

Weaker-than-expected earnings by U.S. chipmaker Intel Corp. also weighed on the market.

The share-price tumble also hit the yen, which fell to a day's low of 115.88 yen to the dollar, before recovering to around 115.60.

"The problem has caused a selling climax. Everyone is throwing in sell orders, said Ken Masuda, a senior dealer at Shinko Securities shortly before trade was halted.

"Even after five minutes, orders aren't going through. This is ridiculous."

Investigators from the Tokyo District Prosecutors' office and the Securities and Exchange Surveillance Commission raided the Tokyo headquarters of Livedoor late on Monday on suspicion that the company had spread false information to investors.

Newspaper reports on Wednesday said the company was also suspected of tampering with its financial reports.

The investigation has scared off individual investors, who were a major factor in the Nikkei's 40 percent rise last year. Only last Friday, the Nikkei hit a five-year closing high.

Individual investors now account for about 40 percent of all trades on the Tokyo, Osaka and Nagoya stock exchanges, up from 30 percent last year.

The Livedoor affair also cast a cloud over the aggressive acquisition strategy and money deals practiced by the firm's maverick CEO, Takafumi Horie, and sparked some concern about damage to Prime Minister Junichiro Koizumi's reform agenda.

Horie, 33, ran unsuccessfully for parliament's lower house as a ruling party candidate last September and Koizumi's right-hand man on economic reforms, Internal Affairs Minister Heizo Takenaka, campaigned for him.

Analysts and some investors themselves said, however, that individuals would resume buying once the Livedoor fuss settled down, given Japan's recovering economy and corporate earnings.

"The past two days have been a warning to the market that things have gone too far and that things have started to look like a bubble," said Masayasu Higuchi, 77, who works for a fishing equipment maker, after selling some shares at a packed day-trading center in the Kayabacho, Tokyo's Wall Street.

"I will wait for the market to settle and when the time is right I want to invest again," he added.