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Nikkei slides 2.5 pct as Nomura hits financials

Published 09/25/2009, 01:25 AM
Updated 09/25/2009, 01:27 AM
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* News of Nomura share sale batters financials

* Commodities fall hits trading firms

* JAL tumbles, new transport minister holds back his support

* Global economic exit strategies eyed - fund manager

By Aiko Hayashi

TOKYO, Sept 25 (Reuters) - Japan's Nikkei stock average slid 2.5 percent on Friday, as financial shares were hit hard after Nomura Holdings said it plans to issue up to $5.6 billion in shares, raising concerns other banks could follow suit.

Nomura shares were poised to fall 16 percent after the announcement about its second share sale this year, which will dilute existing share value by about 30 percent.

Nikko Citigroup downgraded Nomura to "sell/high risk."

Comments from China that the world needs to begin preparing exit strategies from stimulus policies and remarks from a Federal Reserve official that rates may need to rise also weighed on investor confidence, market players said.

Losses were broad-based, with trading houses such as Itochu Corp hurt by falling commodity prices and exporters hit as the yen advanced against the dollar.

"There's a sense of uncertainty in the market as the economic steps taken around the world are facing a turning point, though the real economy seems to have found a floor at this point," said Junichi Misawa, a senior fund manager at STB Asset Management.

The benchmark Nikkei lost 264.24 points to 10,279.98 by midafternoon, after gaining 1.7 percent the previous day.

The broader Topix fell 2.8 percent to 924.11.

An overnight fall on Wall Street, fed by worries that authorities might be curbing stimulus measures too soon, saw the S&P 500 hit by its worst two-day drop in three weeks and also weighed on sentiment.

The Nomura news hit a sector already made jittery by a string of events, including financial services minister Shizuka Kamei's interest in introducing a moratorium on the repayment of the principal on mortgages and bank loans to help small and midsize businesses.

"Worries about the moratorium idea and the news about Nomura's financing are weighing down on the financial sector," Misawa said.

FINANCIALS FALTER

Nomura was untraded, with its price indicated at 573 yen -- down 15.9 percent from Thursday's close -- after announcing the share sale, its second since it bought the European and Asian operations of Lehman Brothers, targeting investments and tighter capital requirements.

Nikko Citigroup downgraded Nomura to "sell/high risk" from "hold/high risk" and cut its target price to 580 yen from 810 yen.

"The issue is larger than we expected and we think potential share price correction below 600 yen must be considered," wrote analyst Makoto Kasai.

Analysts say Nomura's offering could signal another round of fundraising by Japanese banks in the face of a global regulatory push for banks to carry bigger capital buffers to prevent another crisis.

The G20 group of rich and developing countries, now meeting in Pittsburgh, has pushed for global banks to boost their capital by issuing common shares.

Mitsubishi UFJ Financial Group, Japan's top bank, lost 6.1 percent to 495 yen. Sumitomo Mitsui Financial Group dropped 4.9 percent to 3,140 yen and Mizuho Financial Group lost 4.9 percent to 175 yen.

The securities subindex tumbled 10.6 percent, becoming the biggest loser among the subindexes, while the banking subindex sank 4.4 percent.

Japan Airlines dived 6.9 percent to 134 yen after it asked on Thursday for a government bailout, though the new transport minister held back his support on concerns the carrier's cost-cutting plans would not be enough.

The transport ministry said on Friday it has launched a special team to draw up restructuring plans for JAL by the end of November after the struggling carrier's own plans failed to satisfy government officials.

Trading houses tumbled after copper prices fell to a one-month low in New York on Thursday and oil dropped 4.5 percent.

Itochu Corp declined 6.2 percent to 623 yen and Mitsubishi Corp lost 3.9 percent to 1,887 yen.

Among gainers, Nippon Electric Glass Co rose 2.7 percent to 908 yen after the company said its first-half profits are likely to come in above its earlier forecast, buoyed by a recovery in demand for glass sheets used for liquid crystal displays. (Additional reporting by Tokyo newsroom; Editing by Chris Gallagher)

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