Tokyo, (Japan): Investors spooked by a raid on an Internet company and weaker US tech earnings dumped Japanese shares on Wednesday, sending the Nikkei plunging and prompting the Tokyo Stock Exchange to suspend trading on the world's second-largest market.
The TSE halted all trade 20 minutes early at 0240 hrs, IST. (0540 GMT), as the number of trades neared the 4-million capacity limit of the exchange.
Earlier in the day, massive selling, which saw more than 2.3 million trades in the morning session alone, prompted the exchange to issue an extraordinary warning that it might have to suspend trading.
The market plunged further into the red until TSE President Taizo Nishimuro said the exchange would make a decision if trading volume hit 4 million. He also said the TSE might shorten trading hours on Thursday.
His comments appeared to stabilize the market, which recovered some of its lost ground, leaving the Nikkei down 2.94 per cent at the close -- a loss of 464.77 points to 15,341.18. At one point Wednesday the Nikkei average was down more than 4 per cent.
The broader TOPIX finished down 3.49 per cent to 1574.67 after being down more than 5 per cent at one stage.
Other markets in the region were also well in the red, with Taiwan losing more than 3 per cent and South Korea dropping 2.6 per cent.
The massive selling on Wednesday came as investors became nervous over an investigation into Japanese Internet company Livedoor, allied to weaker than expected results from Intel and Yahoo in the US.
Wednesday's extraordinary developments highlighted the weakness of the TSE's computerized handling systems, which have come under increasing scrutiny after a series of mistakes in recent months.
The Nikkei's plunge meant share losses extended into a third day, as trouble at Livedoor drove many retail investors to sell.
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Earlier, brokerage shares took a hit, with industry leader Nomura Holdings Inc. dropping over 5 per cent, after one online broker on Tuesday said it would not accept shares in Internet portal operator Livedoor as collateral for margin trading.
Traders said the surprise move raised concern among investors that other brokers may follow suit, possibly curbing margin trading, which has been one of the engines in the market's rally to five-year highs and a source of revenue for brokerage firms.
Softbank, a favorite of individual investors, extended the previous day's fall and sank over 12 per cent, while technology stocks were dragged down by weaker earnings than expected from Intel Corp. and Yahoo Inc.
On Tuesday, the Nikkei had fallen 2.84 per cent, its biggest one-day fall in nine months, after a raid by prosecutors on Livedoor raised concern that stock prices in companies pursuing growth through acquisitions, like the portal operator does, may be over-inflated.
"Now is the time for a major correction which has been delayed," Yutaka Shiraki, senior strategist at Mitsubishi UFJ Securities, told Reuters.
"Concerns about overheating have been here for the past several months since individual investors pushed up share prices far above their fair value," he said.
Shiraki said individual investors pulled out firstly because of the so-called "Livedoor shock."
"Then the move by Monex Securities supplied more fuel to that sell-off," he said.
Some retail investors have been in a hurry to raise cash by selling shares since Monex Securities, a unit of Monex Beans Holdings Inc., decided not to accept shares in Livedoor and four related companies Livedoor Marketing, Turbolinux Inc., Livedoor Auto and Dynacity Corp as collateral for margin trading from Wednesday.
Trading in Livedoor shares was suspended on the Tokyo bourse's Mothers market for start-ups during the morning after media reports that the Internet firm had tampered with its earnings statements.
Trading in the shares resumed in the afternoon, but they were untraded with a glut of sell orders.
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Yahoo Japan Corp., Japan's biggest Internet portal, fell 9.76 per cent to 148,000 yen. Its parent, Softbank, plunged 13 per cent to 3,340 yen.
Yahoo Inc, the world's largest media company, on Tuesday posted disappointing earnings that reflected higher operating costs, sending its shares tumbling 13 per cent.
Tokyo Electron, the world's second-biggest chip equipment maker, lost 4.15 per cent to 7,860 yen and Ibiden Co. Ltd., which supplies IC packages to Intel, dropped 7.8 percent to 5,660 yen.
Intel on Tuesday posted quarterly profit and revenue below expectations as the world's top chip maker suffered from weak demand for processors used in desktop computers, sending its stock falling almost 9 per cent.
But one analyst said now was a chance to find bargains among chip stocks.
Elsewhere in the region, South Korea's Kospi finished down 2.64 per cent to 1352.84 and Australia's S&P/ASX200 was off 1.63 percent from Tuesday's record close to finish at 4786.9.
In Seoul, market heavyweight Samsung Electronics dropped 3 per cent to 676,000 won, Kookmin Bank fell 4.4 percent and Hynix Semiconductor plunged more than 8 per cent to 33,200 won.
In Australia, resources giant Rio Tinto gave up 2.35 percent to A$70.25, and rival Rio Tinto fell 1 per cent to A$23.73. Big banks were also weaker.
Taiwan also ended well into the red, with the Taiex down 31.6 per cent to 6498.92. There are falls, too, in Hong Kong, New Zealand and Singapore.
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