Japan's bubble floats too close to danger...

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Japan's bubble floats too close to danger
Monday 13 March 2000

The US was supposed to be the place most in danger of suffering a burst high-tech bubble. After all, it invented the fad in "new economy" stocks.

But Japan, which came late to the scene, could get in first.

The frenzied buying of Internet-related stocks, even more pronounced in Tokyo than it has been on Wall Street, began turning sharply downwards last week.

Investors who had been crawling over each other to buy shares in high-flyers like Sony Corp, Softbank and mobile telephone vendor-turned Net investor Hikari Tsushin, began bailing out.

The reversal was originally blamed on profit-taking. Japanese companies close their books at the end of March and the temptation for investors to cash in on some of the big paper gains they have made over the past few months has been huge.

After their meteoric rises last year, Japanese high-tech stocks reached into the stratosphere in manic trading mid-February.

Softbank, the Internet conglomerate run by Masayoshi Son, climbed to 198,000 yen ($A3032) a share while Hikari Tsushin climbed to 241,000 yen, placing both companies in Japan's top 10 in terms of market capitalisation, dwarfing such stalwarts as Matsushita and Honda.

Yahoo!Japan, half owned by Softbank and Japan's dominant Internet portal, was trading at over 100 million yen a share - emphasising just how high investors were prepared to go in search of a piece of the action.

But last week's descent went well beyond orderly profit-taking.

Softbank, hit by a critical Nikko Salomon Smith Barney report of its debt levels and cashflows, plummeted below 100,000 yen on Friday, wiping a staggering US$38 billion ($A61.84 billion) off Son's stake in the company. In just five day's trading, Softbank lost 28.6 per cent in value.

Hikari Tsushin, whose boss Yasumistu Shigeta has been throwing money at Internet start-ups at even more frenetic pace than Mr Son, fared even worse.

The company was the biggest loser on the Tokyo Stock Exchange, plummeting 47.1 per cent over the week and a gasping 24.8 per cent on Friday alone.

The slide had been accelerated by a weekly magazine report accusing Hikari Tsushin and its boss of some dubious business practices, including sales reps switching clients onto different phone carriers without consulting them.

With wild rumors sweeping the market, the company was forced to issue a public denial that Mr Shigeta had been arrested for tax evasion.

That did nothing to help what was supposed to have been the highly lucrative float of a Hikari Tsushin subsidiary, Crayfish, on the Japanese Internet exchange, Mothers, on Friday.

Crayfish debuted on the Nasdaq exchange in the US on Wednesday, selling at about 70 yen million a share. But it stalled in Tokyo at an ask only price of 45 million yen without being traded.

Analysts are wary about predicting an end to the Japanese boom, saying the frenzied trade in the few net stocks available made a 10 to 20 per cent "correction" inevitable. Softbank and Hikari Tsushin are still trading at prices well above those of six months ago. But the hot-house nature of the Japanese high-tech industry, with only a few key players scrambling for ascendancy and a very limited number of stocks available, makes the situation extremely volatile.

Mr Son is estimated to have a stake in up to 70 per cent of the entire Japanese Internet industry.


Crayfish anyone?


Regards from OZ

-- Pieter (zaadz@icisp.net.au), March 12, 2000

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