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Nikkei 225 Falls Most in Five Months on New Variant, Strong Yen

·2 min read

(Bloomberg) -- Japanese stocks led losses in Asia on Friday, as worries over a new coronavirus variant and a stronger yen spooked traders.

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The Nikkei 225 Stock Average closed 2.5% lower, its worst loss since June 21 and leading declines among major equity gauges around the region. SoftBank Group Corp. was among the biggest drags on the blue-chip measure, falling 5.2% after a Bloomberg report that Chinese regulators have asked SoftBank-backed Didi Global Inc. to delist from U.S. bourses.

Technology stocks weighed most on the broader Topix, which slid 2%, with all industry groups in the red. Travel agent HIS Co. sank 7.3%, while Japan Airlines Co. dropped 6.5% on news of the latest virus strain. The MSCI Asia Pacific Index retreated 1.7%, while S&P 500 Index futures slid following the Thanksgiving holiday. The yen gained 0.6% against the dollar on haven buying.

Havens Rally on Concern New Covid Variant Will Derail Recovery

“Today would have been a quiet day if not for the news of the variant,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. “Even before this news, virus cases were back on the rise in the U.S. and Europe, so investors are now wary of the possibility that with a new variant, infections could spread all at once.”

Japan’s local cases of Covid-19 have dwindled in recent weeks while vaccinations have surged to make it one of the most immunized developed countries in the world. Prime Minister Fumio Kishida last week unveiled a 79 trillion yen (about $690 billion) stimulus package to help boost the sputtering economy and launch his new vision of capitalism.

The latest Covid-19 concern caused investors in Japan to hedge positions and take profits Friday, said Koichi Kurose, the Tokyo-based chief strategist at Resona Bank Ltd. “There are foreign investors who are in doubt of the Kishida administration’s thinking on their ‘new capitalism’ policies, so when there’s a global selloff in stocks, the declines are easily exacerbated.”

The virus strain recently discovered in South Africa carries an unusually large number of mutations and is “clearly very different” from previous incarnations, Tulio de Oliveira, a bio-informatics professor who runs gene-sequencing institutions at two South African universities, said at a briefing on Thursday.

“The word is that the new variant is very infectious,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities Co. in Tokyo. “There’s worry that if the existing vaccines don’t work, people will have to resort to lockdowns again.”

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