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Tokyo Stocks At Lowest Level in a Year, Dollar Down

March 14, 1990

TOKYO (AP) _ The Tokyo Stock Exchange’s chief index closed at its lowest level in a year today, while the dollar declined against the yen.

The 225-issue Nikkei Stock Average lost 268.44 points, or 0.82 percent, ending the day at 32,352.13, its lowest level since March 28, 1989, when it closed at 32,306.36.

Dealers attributed the index’s losses to intermittent selling by arbitrageurs - mainly foreign securities firms - throughout the day.

After a series of rises and falls, the index ended the morning session with a 8.94-point gain when index-linked buying won over artibrage selling, traders said. But it soon fell back due to selling by pessimistic institutional investors in addition to arbitrageurs, said Yasumasa Shinagawa, a Yamaichi Securities dealer.

″Investors have little interest in buying issues because economic factors around the market remain the same″ without any positive incentives, he said.

″Participants are now trying to push down the index until the market hits bottom,″ Shinagawa said. He said traders expect the bottom will lie somewhere below 31,000 points.

Dealers said institutional investors were inclined to sell ahead of the fiscal year-end account settlements for company budgets earmarked for investments in financial markets.

Account settlement for fiscal 1989 for most Japanese institutional investors is slated for Thursday.

″There are only a limited number of issues that participants find safe to invest in, because they think company performances have been poor due to the stock exchange’s plunge this year,″ said a dealer with Nomura Securities, speaking on condition of anonymity.

Analysts have blamed computer-aided large-scale arbitrage trading, in which participants profit from price gaps between the spot and futures markets, for recent sharp declines in the Nikkei index, especially when overall volume is low.

Today’s volume on the market’s first section was estimated at 480 million shares, up slightly from Tuesday’s 400 million.

The Nikkei index on Tuesday registered its fourth-largest decline this year, dropping 747.66 points, or 2.24 percent, because of a wave of arbitrage selling, dealers said.

Following a combined decline of 1,372.55 points on Monday and Tuesday, the Nikkei index has lost more than 6,500 points, or 16.9 percent, since the beginning of this year.

In currency dealings, the dollar ended trading at 152.20 yen, down 0.47 yen from Tuesday’s closing of 152.67 yen. It opened lower at 151.90 yen and ranged between 151.70 yen and 152.47 yen.

The dollar weakened today mainly because of technical adjustments and profit-taking, said Kenzo Shinomiya, a trader with Fuji Bank.

″The dollar’s slip is a temporary phenomenon because market players have long (over-bought) dollar positions as a result of so much dollar-buying around 152 yen,″ he said.

The U.S. currency’s fall today does not indicate a trend because market demand for the dollar remains strong, he said.

Other traders said Bank of Japan Governor Yasushi Mieno’s scheduled return to Tokyo from Europe on Thursday also was putting pressure on the dollar, since the market expects the central bank to raise its official discount rate shortly after he returns.

Market players expect the bank to raise the discount rate by as much as 1 percentage point from the current 4.25 percent.

″Since it has been expected for more than a month, a discount rate hike is likely to have little impact because the figure is already factored into the market,″ Shinomiya said.

Benchmark No. 119 Japanese government bonds closed at 86.19 points, up 0.13 from Tuesday’s closing of 86.06. Their yield fell to 7.305 percent from the previous day’s 7.325 percent.

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