Nidec Corp. shares and bonds tumbled in Tokyo trading after the stock was earmarked for removal from the benchmark Nikkei 225 Stock Average and the Topix Index and placed under exchange watch.
The shares of the manufacturer of precision motors plunged by their daily limit of 19% to the lowest level since April on Tuesday. Meanwhile, the credit spreads on some of its corporate bonds widened significantly.
The Tokyo Stock Exchange said Monday that Nidec had been designated a “security on special alert” and placed under its oversight. The same day, Nikkei Inc. announced that it will be removing the stock from its namesake index beginning Nov. 5, replacing it with electronics components maker Ibiden Co.. Ibiden shares jumped as much as 21% to an intraday record high.
The crisis at the Kyoto-based Nidec started last month after it announced evidence that senior executives may have been involved in a number of accounting issues at subsidiaries. A third-party panel was then appointed to look for more suspected instances of improper accounting.
“The shares will in our view continue to find upside hard to come by until the announcement of the results of the third-party committee’s investigation,” Takayuki Naito, an analyst at Citigroup Inc., said in a note. Nidec will also be taken off the Topix index on Nov. 4, according to bourse rules.
The spread on Nidec’s yen-denominated bond maturing in November 2027 widened to 44 basis points, the most in over two years, according to data compiled by Bloomberg. That’s up from about 29 basis points at the start of September. In contrast, spreads on Japanese corporate bonds overall have tightened slightly, a Bloomberg index showed.
“It’s difficult for investors to get involved with corporate bonds issued by companies facing event risks, such as those designated as securities on alert by the Tokyo Stock Exchange,” said Tsuyoshi Yoshikawa, senior credit analyst at SMBC Nikko Securities Inc., speaking in general terms, when asked about Nidec. He added that companies unable to announce earning results will likely face difficulties raising funds in the bond market, and that could also affect their refinancing costs.
Nidec said that it is working to strengthen governance and internal control, according to a statement on Tuesday.