January 18, 2006
Reuters
TOKYO (Reuters) - A stampede of sell orders threatened to shut down the world's second-biggest bourse on Wednesday as investors fled the Tokyo stock market, spooked by fallout from an investigation into Internet company Livedoor Co.
Photo: A Japanese man looks at an electronic monitor displaying market prices at the Tokyo Stock Exchange in Tokyo, where stock trading was suspended after the number of trades threatened to exceed its computer system's capacity January 18, 2006. REUTERS/Yuriko Nakao
The Tokyo Stock Exchange said it would suspend trading of all shares if the number of trades exceeded its computer system's capacity of 4.5 million per day.
Exchange President Taizo Nishimuro told a news conference the bourse would also consider shortening trading hours on Thursday and beyond if necessary. "The recent spike in orders is extraordinary," he said.
The number of transactions had already totaled 3.5 million by 0433 GMT (1:33 p.m.).
News of the possible shut-down accelerated selling across the board, pushing down the Nikkei share average over four percent to as low as 15,059.52 before it clawed back about half those losses.
The share-price tumble also hit the yen, which fell to a day's low of 115.88 yen to the dollar <JPY=>, before recovering slightly to around 115.70 yen.
"The problem has caused a selling climax. Everyone is throwing in sell orders. The system is jammed and orders aren't making their way through," said Ken Masuda, a senior dealer at Shinko Securities.
"Even after five minutes, orders aren't going through. This is ridiculous," he said.
The exchange has been hit by a series of system problems including a glitch that halted trading for almost a full day last year.
Investigators from the Tokyo District Prosecutors' office and the Securities and Exchange Surveillance Commission raided the Tokyo headquarters of Livedoor late on Monday on suspicions the company had spread false information to investors.
The investigation scared off individual investors, who have been helping to push up the Nikkei, which rose more than 40 percent last year and hit a five-year closing high of 16,454.95 last Friday.
"This is clearly about the TSE's system risk," said Tsuyoshi Nomaguchi, strategist at Daiwa Securities.
"This is an event unheard of before.
"Investors, who have traded stocks on the assumption that the TSE system does not break down, are running away from the market and the selling pressure will continue for the rest of the day."
"Until the investigation on Livedoor and the fate of the company becomes clear, selling pressure on the overall Tokyo stock market will likely stay. But I think the market will recover after that," he said.
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