Japanese Stocks May Drop for an Eighth Day on Yen Strength

By Patrick Rial


Nov. 13 (Bloomberg) -- Japanese stocks may drop for an eighth day, led by exporters and lenders, after the yen strengthened and an analyst said E*Trade Financial Corp. may go bankrupt, pointing to increased subprime losses in the U.S.

Mazda Motor Corp., which exports 80 percent of its domestic production, and Sumitomo Mitsui Financial Group Inc., the nation's No. 3 publicly traded bank, may pace the drop.

Shares of E*Trade, a U.S. online brokerage, lost more than half their value yesterday after a Citigroup Inc. analyst said there is a 15 percent chance the company will seek protection from creditors because of investments in asset-backed securities. The yen climbed to the highest since May 2006 against the dollar.

Mitsubishi Corp. may drop after the price of oil slid 1.8 percent to the lowest close in a week, while copper and gold prices also tumbled.

``Investors are not going to be able to escape the negative impact on sentiment from what is happening in the U.S.,'' said Terunobu Kinoshita, who helps manage $785 million at Fund Creation Co. in Tokyo. ``Just as some experts expect oil to keep rising, there is also the real possibility we may see oil prices fall to $60.''

Nikkei 225 Stock Average futures expiring in December last traded in Chicago at 15,015, down from the close of 15,230 in Osaka and 15,165 in Singapore yesterday. The Bank of New York Japan ADR Index, which tracks the nation's American depositary receipts, slipped 0.2 percent.

Yen Strength

Yesterday, the Nikkei tumbled 2.5 percent to 15,197.09 and the Topix index dropped 2.5 percent to 1,456.40, the lowest in more than two years.

U.S.-traded receipts of Toyota Motor Corp., which gets as much as 70 percent of its operating profit from North America, lost 1.3 percent from the closing share price in Tokyo yesterday. Those of Sumitomo Mitsui slid 2.1 percent.

The yen recently strengthened to 109.50 against the dollar, from 110.34 at the close of market trading in Tokyo yesterday. Japan's currency rose to as high as 109.13, the strongest since May 2006. Against the euro, the yen advanced to as high as 158.71, a level not seen since Sept. 13. A stronger yen decreases the value of Japanese exporters' dollar-denominated sales when converted into local currency.

Prashant Bhatia, an analyst at Citigroup in New York, wrote in a report that there's a 15 percent chance E*Trade will seek protection from creditors after poor management ``put the viability of the franchise at risk.'' The company said last week it expects significant writedowns for losses on asset-backed securities.

E*Trade spokeswoman Pam Erickson described Bhatia's analysis as ``irresponsible'' and ``unfounded speculation.''

Oil Tumbles

Mitsubishi Corp., Japan's largest trading company, generates the second-biggest proportion of its sales from selling crude and industrial fuel. Profits at Mitsui & Co., Japan's second-largest trading company, are the most sensitive to fluctuations in the price of oil.

Crude oil for December delivery fell 1.8 percent to $94.62 a barrel in the New York. The contract recently fell an additional 0.9 percent to $93.75 in after-hours trading. Copper futures fell 1.2 percent to a seven-month low, while gold plunged 3.2 percent, the biggest drop since Oct. 2006.

Tokyu Corp., an operator of railways, department stores and hotels, may advance. The company may say first half operating profit, or sales minus the cost of goods sold and administrative expenses, rose 12 percent to 42.5 billion yen ($388 million), the Nikkei newspaper reported. That would exceed the company's current forecast by 1 billion yen.

Isuzu Motors Ltd., Japan's third-biggest maker of commercial vehicles, may slip after the company reported a 26 percent drop in second-quarter operating profit as domestic sales slumped.