Morgan Stanley Investigation Threatens Japanese Banking Stocks


In Asia Wednesday Japan's Nikkei 225 Index dipped 0.2% to 10,394. Hong Kong's Hang Seng Index added 0.3% to close at 20,212 and China's Shanghai Composite Index also advanced 0.3% to end the day at 2,656.

Shares in Japanese banks took a tumble today in reaction to news of an SEC probe into Morgan Stanley (MS). U.S. prosecutors are looking into whether the bank misled investors about mortgage-derivative deals, which they then bet against. The case is strikingly similar to the ongoing investigation into Goldman Sachs (GS).

Today Mitsubishi UFJ Financial Group, which owns around 20% of Morgan Stanley according to Bloomberg, sank 2.4%. Mizuho Financial Group fell 3.6% and financial services company Nomura Holdings declined 1.8%.

A stronger yen translated into losses for electronics companies. Olympus sank 7.7% and Konica Minolta dropped 1.2%. Clarion, which makes sound systems for cars, retreated 2.2%, Sanyo Electric fell 2.1% and Sony, heavily dependent on revenue from abroad, tumbled 1.6%.

Gains in the automotive sector worked to balance losses in other sectors. Isuzu surged 6.3%, Toyota advanced 2.7% after predicting big profits ahead. Honda gained 1% and Mazda inched up 0.8%. Hino Motors, a maker of buses and trucks, rocketed up 5.5%.

NTT Data made the biggest advance on the Japanese board. The computer network system company leaped 10.5%.

In China, concerns that the government will continue to impose new restrictions aimed at curbing inflation and dampening soaring house prices, sent most shares lower. Air conditioner and freezer maker Qingdao Haier fell 3.3% and beer maker Tsingtao Brewery slumped 2.8%. But property companies surged today -- ironic since many of the new investment restrictions are focused on cooling property prices and the property investment mania that has gripped the country. Today Poly Real Estate surged 3.6%, Gemdale climbed 2.3% and China Vanke gained 1.2%.

In Hong Kong, however, developers with large investments riding on projects based in China lost value today. Country Garden, owned by Yang Huiyan, who was declared Asia's richest women in 2007, dived 4%, China Resource Land lost 3.1%, China Overseas slumped 2.6% and Agile Property declined 2%.

Meanwhile, a new pledge by Hong Kong's government, which will reportedly increase land supply in an effort to cool the property boom, also had a mixed effect today, with a number of Hong Kong developers recouping some of their recent losses. Swire Pacific gained 2%, Hang Lung rose 1.1%, New World Development advanced 1.1% and Henderson Land increased 0.8%.

Other Hong Kong performers included China Resource Power, which increased 2.4% and HSBC, which got a 1.7% boost. HSBC is based in the U.K. -- perhaps investors feel more confident now that the bank's home country has an actual government today.

Originally published