Nikkei falls, partly recovering from Credit Suisse’s rescue plan

TOKYO/SINGAPORE, March 16 (Reuters) – Japanese shares closed in the red on Thursday but recovered some losses after Swiss bank Credit Suisse announced a plan to increase liquidity.

Shares in Japanese banks have fluctuated sharply this week, with the Nikkei dipping below 27,000 for the first time since January 23 amid fears that the fallout of Silicon Valley Bank and Credit Suisse’s troubles would spread further.

The Nikkei closed up 0.8% at 27,010.61 points, partially recovering from an intra-session drop to its lowest level since January 20.

The broader Topix index fell 1.17% to 1937.10.

Credit Suisse said on Thursday it would take out a $54 billion loan from the Swiss central bank to boost liquidity and investor confidence after a collapse in the lender’s shares increased fears of a global banking crisis.

Japanese bank papers trimmed losses but still lost 3.26% on Thursday. Losers included Sumitomo Mitsui Trust Holdings Inc, which fell 6.27%, and Japan Post Bank Co Ltd, which fell 5.2%.

Including Thursday’s session, the banking sector sub-index fell by almost 17% in five days and by 4% since the beginning of the year.

Japan’s banking sector has been hit hard by losses on Silicon Valley Bank bonds, drawing attention to the risk of giant Japanese lenders investing in foreign bonds estimated to carry more than 4 trillion yen ($30 billion) in unrealized losses.

Changes in forecasts of global interest rates also thwarted expectations for the normalization of monetary policy by the Central Bank of Japan and the chances of an increase in margins of Japanese banks in the near future.

The main players in the Japanese stock market were foreigners, which explains the spread of the crisis, said Shigetoshi Kamada of Tachibana Securities.

“Investors are forced to sell Japanese stocks to offset losses. Since the beginning of the year, they have been buying undervalued stocks like banks and insurers in search of high dividend payouts and to take advantage of low price-to-book ratios,” Kamada said.

“The decline in bank stocks (in Tokyo) may be a reaction to their recent surge,” said Takatoshi Itoshima of Pictet Asset Management. “The basic financial situation in Japan differs from what is happening in the US and Europe.”

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(Junko Fujita)