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Nikkei slides as virus anxiety offsets boost from softer yen

The Nikkei share average dropped 0.39 per cent to 23,386.74.

Reuters|
Last Updated: Feb 21, 2020, 01.57 PM IST
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Agencies
Japan
The broader Topix ticked down 0.03 per cent to 1,674.00.
Japanese shares ended lower on Friday as mounting coronavirus cases in China and other Asian countries eclipsed the boost from a weaker yen, with many investors closing their positions ahead of a long weekend.

Investors also dumped shares that appeared vulnerable to further spread of the pathogen, such as transport services, and instead picked up stocks of internet services firms.

The Nikkei share average dropped 0.39 per cent to 23,386.74, while the broader Topix ticked down 0.03 per cent to 1,674.00. On the week, the Nikkei was down 1.27 per cent and the Topix fell 1.70 per cent.

That compared with a fall of 0.2 per cent in US S&P500 and a 0.1 per cent drop in FTSEurofirst, as of Thursday.

"Japan stock ETFs have seen outflows of funds. At the moment, investors favour US and European stocks among the developed markets," said Takeo Kamai, head of execution at CLSA.

The outbreak has already disrupted economic growth in China and a further spread to other countries could derail a "highly fragile" projected recovery in the global economy in 2020, the International Monetary Fund warned on Wednesday.

The new cases are mushrooming beyond China, most notably in Japan and South Korea this week.

Fund managers worry virus concerns will slow down various economic activities, with many companies cancelling official trips, seminars and parties as people kept away from crowds.

Retailers ended 3.9 per cent lower, while airlines dropped 3.8 per cent and railway operators shed 3.4 per cent.

Many companies faced the double-whammy of a drop in Chinese tourists.

"You ask around and everyone is cancelling business trips, conferences and all sorts of things now ... At this point, I just cannot buy any stocks," said Hisashi Iwama, senior portfolio manager at Asset Management One.

Sanrio fell 3.3 per cent to a 21-month low after the character goods company known for Hello-Kitty said it will shut its amusement parks.

Tokyo Disney Resort operator Oriental Land Corp lost 2.5 per cent for a weekly fall of 7.3 per cent.

Steelmakers, leveraged to Chinese demand, were the worst performer for the week, hit by a surprise decision from industry leader Nippon Steel late last week that it will slash its production capacity by nearly 10 per cent.

Kobe Steel lost 1.5 per cent to a 17-year trough on Friday, following Nippon Steel, which hit similar lows earlier this week.

On the other hand, internet firms gained on expectations the epidemic will stoke people to spend more time indoors and on the internet.

Z Holdings rose 4.5 per cent, while Rakuten also gained 4.1 per cent.

A weaker yen helped to lift exporters such as automakers, with Toyota Motor advancing 1.1 per cent. The transport equipment index added 0.5 per cent.

The yen was headed for its worst week in two-and-a-half years, as worries about the coronavirus' spread in South Korea, Japan and Beijing drove funds from Asia to the towering US dollar.

The market will be closed on Monday as Japan gears up to celebrate the birthday of their new emperor.
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