(Bloomberg) -- While Japanese stocks spooked investors on Thursday with a second day of declines, the magnitude of the moves and the market dynamics appeared very different to the three-day slide that culminated in the crash of Aug. 5.
An initial 1.9% slump in the tech-heavy Nikkei 225 Stock Average quickly pared — and even reversed for a short time — with a similar picture seen in the broader Topix benchmark. The gauges were down about 1.2% and 0.5%, respectively, in afternoon trading in Tokyo.
In contrast to August, when financial stocks led the market lower with double-digit percentage drops, weakness in recent days has been milder and more concentrated among semiconductor-related names and companies with exposure to commodity markets. Market turnover in the first three trading days of September is also down about 43% on the same period last month.
Rather than Japan being at the epicenter of global market moves as it was last month — when the central bank’s hawkish monetary stance upended strategies for currency and interest rates trade — equities in Tokyo this month have moved less than those elsewhere.
One factor that amplified the drops in August was forced selling by Japanese retail investors, who had to close bloated margin trading positions.
“These positions have been shaken off already,” said Yusuke Sakai, a senior trader at T&D Asset Management Co. in Tokyo. “We are unlikely to see panic-selling like before.”
Yet the weakness seen Thursday, which comes after the Topix dropped 3.7% on Wednesday, is likely to keep investors on high alert for the risk of unseen dangers.
“Yesterday’s fall leads me think that the market is still unstable,” said Takeo Kamai, head of execution services at CLSA Securities Japan Co. “Last month was so tiring, with such historic moves. That’s still not comparable to what’s happening now.”
--With assistance from Yasutaka Tamura.
©2024 Bloomberg L.P.
