Tokyo: Stocks end lower as Archegos woes rattle financials

[TOKYO] Japanese stocks fell on Wednesday as investors sold financial shares due to growing uncertainty over the fallout from the margin calls that brought down New York-based hedge fund Archegos Capital.

The Nikkei 225 Index ended 0.86 per cent lower at 29,178.80, while the broader Topix dropped 1.21 per cent to 1,954.00.

Mitsubishi UFJ Financial Group fell 3.87 per cent. The bank said after the market close on Tuesday that it may suffer losses of around US$300 million at its European subsidiary related to a US client that it did not name.

The warning about losses came only a day after Nomura Holdings stunned investors by flagging a potential US$2 billion loss from a single US client. Nomura's shares fell 2.9 per cent, down for a third straight session.

"Opinion is divided between those who say this is a problem confined to one hedge fund and those who warn of even more losses," said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank.

"It is perfectly understandable that investors would want to lighten some of their positions in financial shares." Global investment banks including Nomura and Credit Suisse may lose more than US$6 billion as lending to Archegos for equity derivatives trades soured, sources said.

However, there is still a degree of uncertainty about the true scale of the problem, which could continue to weigh on financial shares, analysts said.

The Topix sub-index for banks fell 3.2 per cent, which was the biggest decline in a week. The sub-index for brokerages also dropped 2.1 per cent.

REUTERS