Selling stampede shuts down Tokyo stock market

By Linda Sieg and Yukari Iwatani

TOKYO (Reuters) – A stampede of sell orders forced the
shut-down of the world’s second-biggest bourse on Wednesday as
investors fled the Tokyo stock market, spooked by fallout from
an investigation into Internet company Livedoor Co..

The Tokyo Stock Exchange suspended trading at 0540 GMT
(2.40 p.m.), 20 minutes before the normal closing time, after
the number of transactions threatened to exceed its computer
system’s capacity of 4.5 million trades per day.

The exchange has been hit by a series of system problems in
recent months, including a glitch that halted trading for
almost a full day late last year.

Analysts said Wednesday’s shut-down would deal another blow
to the image of the exchange, which has plans to list its own
shares.

Exchange President Taizo Nishimuro told a news conference
earlier that the bourse would also consider shortening trading
hours on Thursday and beyond if necessary.

“The recent spike in orders is extraordinary,” he said.

The number of transactions had reached about 4 million by
0525 GMT (2:25 p.m.).

News that the exchange was considering a shut-down
accelerated selling across the board, pushing down the Nikkei
share average by more than four percent to as low as 15,059.52
before it clawed back to finish the shortened session down 2.94
percent at 15,341.18.

That was still the Nikkei’s biggest one-day fall since
April 18, 2005, when it fell 3.8 percent. The broader TOPIX
index fell 3.49 percent to close at 1,574.67.

The three-day sell-off has wiped out more than $300 billion
in shareholder value — equal to about the gross domestic
product of Sweden.

YEN UNDER PRESSURE

The share-price tumble also hit the yen, which fell to a
day’s low of 115.88 yen to the dollar, before recovering to
around 115.60.

“The problem has caused a selling climax. Everyone is
throwing in sell orders. The system is jammed and orders aren’t
making their way through,” said Ken Masuda, a senior dealer at
Shinko Securities. “Even after five minutes, orders aren’t
going through. This is ridiculous.”

Investigators from the Tokyo District Prosecutors’ office
and the Securities and Exchange Surveillance Commission raided
the Tokyo headquarters of Livedoor late on Monday on suspicion
that the company had spread false information to investors.

Newspaper reports on Wednesday said the company was also
suspected of tampering with its financial reports.

The investigation has scared off individual investors, who
were a major factor in the Nikkei’s 40 percent rise last year.
Only last Friday, the Nikkei hit a five-year closing high.

“This is clearly about the TSE’s system risk,” said
Tsuyoshi Nomaguchi, strategist at Daiwa Securities.

“This is an event unheard of before.

“Investors, who have traded stocks on the assumption that
the TSE system does not break down, are running away from the
market and the selling pressure will continue for the rest of
the day.”

“Until the investigation on Livedoor and the fate of the
company becomes clear, selling pressure on the overall Tokyo
stock market will likely stay. But I think the market will
recover after that,” he said.