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Japan shares fall as Archegos fallout hits financials

TOKYO, March 31 (Reuters) - Japanese stocks fell on Wednesday as investors sold financial shares due to growing uncertainty about the fallout from the margin calls that brought down New York-based hedge fund Archegos Capital.

The Nikkei 225 Index was down 0.77% at 29,206.38, as of 0214 GMT, while the broader Topix declined 0.59% to 1,966.19.

Mitsubishi UFJ Financial Group Inc fell 2.83%. The bank said on Tuesday after the market close that it may suffer losses of around $300 million at its European subsidiary related to a U.S. client that it did not name.

The warning about losses came only a day after Nomura Holdings stunned investors by flagging a potential $2 billion loss from a single U.S. client.

“Opinion is divided between those who say this is a problem confined to one hedge fund and those who warn of even more losses,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank.

“It is perfectly understandable that investors would want to lighten some of their positions in financial shares.”

Global investment banks including Nomura and Credit Suisse may lose more than $6 billion as lending to Archegos for equity derivatives trades soured, sources said.

However, there is still a degree of uncertainty about the true scale of the problem, which could continue to weigh on financial shares, analysts said.

The Topix sub-index for banks fell 2.4%, which was the biggest decline in a week. The sub-index for brokerages also dropped 1.7%.

In the positive territory, Sony Corp rose 2.87% and Toyota Motor Corp advanced 2.86% as the yen’s decline to a one-year low against the dollar boosted shares of major exporters.

Japan’s new fiscal year will start from Thursday, which normally leads to a rush of new money into equities, but doubts about the financial sector could make some investors more cautious about entering the market, some analysts said. (Reporting by Stanley White, Editing by Sherry Jacob-Phillips)

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