Subprime Losses and Bond Insurers

Fitch Ratings announced on its web site that it had placed MBIA Inc. “AAA” rating on negative watch. The U.S. bond insurer provides insurance to municipal, state, and other regional government debt offering s for a fee. In the last five years the company had branched out to mortgage securities. However, a large number of mortgage bonds have lost value prompting heavy expenses at the insurer. The bond insurer has raised nearly $1 billion in new capital to bolster its balance sheet but investors worry that future subprime losses may leave the insurer with less capital and then adequate to pay for the insurance coverage.



Merger News Update

The Yomiuri online edition reported today that plans between Japan Tobacco and Nissin Foods Limited to merge their frozen foods units had collapsed amid accusations that Japan Tobacco had sold poisoned China made dumplings.

Under the deal, Japan Tobacco wanted to sell 49% equity in its frozen food unit Katokichi Co.

The yen declined from 106.38 to 106.43 against the dollar.

Gainers and Losers

Clarion Co. Limited led gains of the Nikkei 225 index shares with a rise of 6.19% followed by gains in Nikon Corp. of 3.08%, in Asahi Brewers of 2.50%, in NSK Limited of 2.09%, and Mitsubishi Heavy Industries of 1.60%.

Tosoh Corp. led decliners with a fall of 12.92% followed by losses in Mitsui & Shipbuilding of 12.30%, in Toho Zinc Limited of 11.15%, in Dowa Holdings Co. of 10.68%, and in Unitika Limited of 10.62%.

Earnings News

Nikon Corp. rose on the back of strong earnings results. The company reported net income grew 13% to 26 billion yen. Sales also jumped 14% from the previous quarter to 266.4 billion yen on strong sales of D3 and D300.

Mitsubishi Heavy Industries also gained as net income in the nine months jumped 41% to 54.2 billion yen from 38.5 billion yen on lucrative contracts to build ships.

The company also raised its full-year net income forecast to 60 billion yen from 54 billion yen. Operating profit is also forecasted to rise to 130 billion yen from115 billion yen.

Rohm Co, which is a parts supplier to Nintendo, cut its full-year annual profit target by 25%. Similarly, Orix Corp lowered its annual profit estimate by 16%.

Oil and Commodities Related

Shipping lines and commodity stocks also fell on speculation that the U.S. is in recession, a development that might lead to falling demand. Sumitomo Metal Mining shed 7.23%, Nippon Mining House declined 8.87%.

Energy stocks fell after crude oil prices for March delivery fell 1.9% to $88.41 per barrel yesterday.