The Tokyo Stock Exchange (TSE) closed early on Wednesday for the first time ever to prevent a system crash from heavy trading volumes as investors took fright at claims of fraud at internet trailblazer Livedoor.
The exchange operator suspended trading in all shares for the rest of the day at 2.40pm local time, 20 minutes ahead of the scheduled close of Asia’s largest bourse.
The Nikkei-225 benchmark index ended the day down 464,77 points or 2,94% at 15 341,18 points. It was earlier more than 740 points or 4,7% in the red after the bourse warned it might close early.
Livedoor’s offices were raided late on Monday for suspected illegal securities trading and other wrongdoing, and Japanese newspapers carried fresh allegations on Wednesday that the internet firm cooked the books to hide losses.
The firm was founded by the flamboyant 33-year-old Takafumi Horie, a T-shirt-wearing dropout who built an internet empire and had been heralded as the face of a new corporate Japan.
“The number of orders and deals done has been increasing today on the exchange and the cases of deals may surpass the volume the system can handle,” TSE president Taizo Nishimuro said in a warning to the market.
“We inform in advance that we will suspend trading in all shares in the case of the number of executed deals exceeding four million as it would impede the system from continuing to process transactions,” he said.
Trading volumes on the Tokyo exchange have risen to record levels on a wave of interest by foreign investors and individuals dealing over the internet.
Concern about the exchange’s system has grown since the bourse suffered its worst-ever systems crash in November. On that occasion, it managed to resume trading to close at the regular time.
The Livedoor probe has raised concerns about corporate governance and is likely to dim investor appetite for start-up firms in the near term, dealers said. It may also put a damper on companies like Livedoor that have grown or are seeking to grow their businesses through mergers and acquisitions.
“The market is still struggling with the selling pressure spurred by the Livedoor incident,” said Hideyuki Suzuki, a strategist at SBI Securities.
He added, however, that the current selling spree is likely to be short-lived as the problems at Livedoor are company specific, with market attention soon likely to refocus on upbeat prospects for the economy.
“Now, the market is in panic, but we will see it settle down after a while,” he added.
The mass-circulation Yomiuri Shimbun said Livedoor allegedly falsely reported 1,4-billion yen ($12-million) in parent-level recurring profit for the year to September 2004 by transferring profits from affiliates.
The transaction was allegedly made to hide a true figure — a loss of one billion yen, the daily said, quoting anonymous sources. — AFP