Tokyo Exchange Outage Seen Not Hurting Stocks If Kept to One Day

(Bloomberg) -- Investors waiting for Japan’s $6.15 trillion equity market to reopen after a hardware breakdown say the impact on share prices should be limited if the stoppage is kept to just one day.

While the Tokyo Stock Exchange gave no time frame for when trading would resume from its worst outage since the bourse fully computerized trading in 1999, some investors are confident operations will restart Friday. TSE operator Japan Exchange Group Inc. gave no time frame for when trading will begin, saying that it will give a briefing at 4:30 p.m. in Tokyo on Thursday.

“It’s good that this didn’t happen when volatility is high, like after the U.S. elections,” said Kiyoshi Ishigane, the chief fund manager at Mitsubishi UFJ Kokusai Asset Management Co. in Tokyo. Market suspensions don’t impact fundamentals, so the shutdown won’t lead to mass selling, he said.

Should the U.S. equity market remain flat tomorrow and the Tokyo bourse reopen, Japanese stocks may be bought, led by futures, according to Norihiro Fujito, the chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. Fundamentals have been a tailwind for Japanese stocks, making it unlikely that foreign investors will suddenly change their outlook on the market because of a single-day halt, Fujito said.

However, a failure to reopen could have serious implications for Japan’s market, with the pricing of contracts and unwinding of positions frozen for the rest of the week, according to Gary Dugan, chief executive officer of the Global CIO Office. in Singapore.

“If there is a big move on Wall Street, it will compound potential compensation claims,” he said.

Makoto Sengoku, a market analyst at Tokai Tokyo Research Institute Co., is taking comfort from the fact that Japanese equity futures are rising despite the underlying market’s shutdown. He’s more concerned about the halt’s impact on the start-up Tokyo Stock Exchange Mothers Index because of the heavy presence of retail investors.

“For retail investors that are trading everyday, today might be a shock, but for those who aren’t frequently trading its not as impactful,” he said.

Futures contracts on the Nikkei 225 Stock Average closed 0.5% higher in Osaka.

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