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TRADE WARS
Toshiba shares fall 20% after it flags one-off loss
By Kyoko HASEGAWA
Tokyo (AFP) Dec 28, 2016


Tokyo follows Wall Street down as Toshiba stocks plunge again
Hong Kong (AFP) Dec 29, 2016 - Tokyo followed Wall Street lower Thursday and US crude oil edged down from recent highs as Toshiba's stock plunged for the third straight day.

The troubled conglomerate's stock ended another torrid day 17 percent down, following the company's warning of a possible one-time loss of several billion dollars over its US nuclear business.

Its shares have now lost more than 40 percent of their value since Tuesday and have seen virtually all gains for the year erased.

Overall, Japanese stocks saw their biggest drop in more than a month Thursday after a 1.3 percent fall. The Nikkei is now up just 0.7 percent in 2016.

Other major markets were mixed with Hong Kong essentially flat and Shanghai drifting marginally lower by the close. Sydney recorded a 0.3 percent rise to end at its highest level of the year.

Earlier, the Dow had receded after nearing the historic 20,000 benchmark with shares of some banks falling more than one percent after the stock prices had won outsized gains in the rally seen since US election day.

Wall Street investors sold equities at the fastest rate since before Donald Trump's surprise election victory in November, paring the post-election rally. The dollar had risen since the billionaire's win on speculation he will boost public spending.

"A market riding on expectations toward a Trump presidency is coming to a close, and we're starting to focus on reality," said Mitsushige Akino, an executive officer at Ichiyoshi Investment Management in Tokyo, told Bloomberg News.

"I expect investors to take a more nervous stance toward US economic indicators from here on."

Bill Lynch, director of investment at Hinsdale Associates, added investors were taking stock as the Dow's 20,000 level loomed.

"There is a fair amount of profit-taking when the stocks get closer to that milestone," he said.

The yen and euro climbed against the dollar and both main oil contracts fell, ending crude's nine-day winning streak, ahead of inventory data from the US Department of Energy later Thursday, with the market expecting a 1.5 million barrel drawdown.

But analysts cautioned with trading volumes less than half the average, a clearer picture of the market would not emerge until the OPEC output cut deal takes effect in January.

"I don't think we can read a lot into what happens (in the market) until we get a clearer picture of the OPEC deal in the new year," said CMC sales trader Alex Furber.

"Obviously they have got a deal in place, but whether they keep to it is a different matter."

Toshiba shares dived more than 20 percent Wednesday in their second straight double-digit plunge, as the company said it may book a one-time loss of several billion dollars over its US nuclear business.

The stock price dropped by 20.42 percent to 311.60 yen, the largest fall allowed for a single day, about 30 minutes after the opening bell, as the company failed to ease investor worries over the potential risk. It finished the session at that level.

The Tokyo-based conglomerate said Tuesday in a statement that costs linked to the acquisition last year by its US subsidiary of a nuclear service company would possibly amount to "several billion US dollars, resulting in a negative impact on Toshiba's financial results".

The exact figure of the potential write-down is still being worked out, Toshiba president Satoshi Tsunakawa told reporters after the announcement, apologising for "causing concern".

The company statement suggested the figure would be released soon, citing an end-of-year deadline for settling the valuation of the nuclear deal.

The announcement came after Toshiba shares closed nearly 12 percent lower on Tuesday on media reports about the potential loss.

After the market closed Wednesday, Standard & Poor's cut two of Toshiba's credit and debt ratings by one notch each in response to the company's announcement. S&P also placed the ratings on watch, suggesting they could be downgraded further.

Analysts said uncertainty was fuelling investor anxiety.

"Concerns have yet to be cleared away as they said they didn't know the figure," Yukihiko Shimada, senior analyst at SMBC Nikko Securities, told AFP.

SMBC Nikko credit analysts Yutaka Ban and Kentaro Harada said in a report that investors "can't be optimistic about the situation" even though the total write-down may not end up as big as the 500 billion yen ($4.3 billion) reported by local media.

Nomura Securities analyst Masaya Yamasaki said in a report issued late Tuesday that the expected loss "is negative for the company as its financial standing is fragile".

- 'Seek support' -

Tsunakawa at the press conference answered in the affirmative when asked if Toshiba is considering boosting capital.

Chief financial officer Masayoshi Hirata said that after the figure is confirmed the company will "explain and seek support" from financial institutions.

Toshiba said the possible loss was related to the valuation of the purchase by subsidiary Westinghouse Electric of the nuclear construction and services business of Chicago Bridge & Iron.

Westinghouse and Chicago Bridge & Iron have turned to an independent accountant to resolve a dispute over differences in asset valuations, Toshiba said earlier this year.

Toshiba said Tuesday the potential write-down would "far exceed" the $87 million first expected, resulting in a "far lower asset value than originally determined".

Toshiba's latest full-year forecast is for annual net profit of 145 billion yen ($1.24 billion), up 45 percent from an earlier estimate, on sales of 5.4 trillion yen.

But Tuesday it said it would release a revised earnings forecast as soon as possible to reflect the coming write-down.

Toshiba's nuclear woes are the latest blow to the once-proud pillar of corporate Japan.

It has been besieged by problems, most notably a profit-padding scandal in which bosses for years systematically pushed subordinates to cover up weak financial results.

In an intensive overhaul, the company has been shedding businesses and announced the sale of its medical devices unit to camera and office equipment maker Canon.

Investors had welcomed the makeover, with Toshiba shares having climbed 77.3 percent this year through Monday. But after this week's declines they are only up 24.7 percent

kh/nf/kgo/ceb

TOSHIBA

CB&I - CHICAGO BRIDGE & IRON NV


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