Sell-off on Tokyo start-ups market raises concerns

TOKYO: Japan’s stock market for start-up firms plunged to two-month lows this week as investors pulled money out of the risky and inflated market, raising concerns the broader stock market could also see some spillover.

The Tokyo Stock Exchange’s Mothers start-up market saw its main index plummet this week, marking a loss of almost 10% from a one-year peak hit in June.

Trading in futures on the Mothers Index, which had been mostly dormant since their inception in July last year, suddenly spiked to a record high of about 4,700 lots on Tuesday, more than 10 times larger than the daily average of about 390.

The main stock market has so far been relatively untouched by the selloff, with the benchmark Nikkei staying above the 20,000 level it scaled in June.

Yet, fund managers and analysts suspected the Mothers market is facing pressure from selling by hedge funds and foreign investors, who expect a sharp downturn. And further selling could spill over to smaller companies on the main board.

“This time, something is different. Because we Japanese day traders don’t use the Mothers futures much, if not at all, I suspect it’s foreign players,” said Naoki Murakami, a professional day trader who focuses on start-up shares. “I’m going to sit on the sidelines until the storm passes.”

The Mothers Index – an acronym for Market Of The High-growth and Emerging Stocks – comprises biotech and internet ventures and other smallcaps.

On average about ¥150 billion (RM6 billion) worth of shares change hands a day, or about 3% of the market’s value, compared with less than 0.5% on the main board.

The index, which was closely correlated with the US Nasdaq technology share market during the 2008 global financial crisis, had risen 28% in the year to June, better than the Nasdaq’s 18% and the Nikkei’s 5% gains during the same period.

Some traders said profit-taking on Mothers appeared to be driven in part by the sudden fall in high-flying US tech shares last week. – Reuters