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Japanese Stocks Suffer Third-Worse Loss Ever

October 26, 1987

TOKYO (AP) _ The Tokyo Stock Exchange suffered its third worst loss ever today as panicked investors raced to sell shares, but the market recovered somewhat near the close.

Analysts said the plunge reflected investors’ uncertainty over the market’s stability following last week’s chaos, a sharp drop on the Hong Kong Stock Exchange today when it reopened for trading after a four-day suspension, and high demand by clients on fund managers to settle transactions.

The key indicator, the 225-share Nikkei stock average, plunged 1,096.22 points, to close at 22,202.56, a loss of 4.7 percent. Earlier, it had fallen 1,678.70 points to 21,620.08.

The drop fell short of Friday’s 1,203-point plunge, the second worst on record. The Tokyo exchange’s worst day was last Tuesday, when the Nikkei index shed 3,836 points in reaction to Wall Street’s historic decline the day before.

There were few buyers in the market today relative to sellers. Volume in the first section was a light 650 million shares.

As happened last week, individual investors were responsible for most of today’s plunge, said Yozo Asai of Yamaichi Securities.

″Institutional investors are waiting on the sidelines to see what will happen in New York and London,″ Asai said. ″There is no clear pattern to the declines so far ... but we can say anxiety is the key problem.″

Ginger Tulley, an analyst at Vickers da Costaeties over market crashes overseas.

The Hang Seng index, the Hong Kong market’s prime gauge of blue-chip stocks, closed at 2,241.69, down 1,120.70 points from Oct. 19, when nosediving prices led the exchange to order the suspension the next day.

″In both Tokyo and Hong Kong, investors are trying to sell for cash,″ Asai said. ″We still can’t tell if the markets will turn around.″

Late buying by certain investment trusts softened the Nikkei’s fall today, according to reports from brokers, which could not be immediately verified.

Japan’s Finance Ministry informally asked major investment trusts - heavy sellers in the morning session - to resume active buying. The institutions reportedly entered the market one hour before closing, buying export-led electrical and other scattered issues.

Early in the day, some analysts had said they were confident of the stock market’s underlying strengths.

″Japan is the world’s financial giant,″ said Yukio Sugawara of Nikko Securities. ″The supply of stocks is small relative to demand, and I think resources will continue to pour into the market.″

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