March 18, 2020 / 8:01 AM / 16 days ago

Nikkei hits 3-1/2-year low as investors flee equities; SoftBank Group tumbles

March 18 (Reuters) - Japan’s Nikkei share benchmark saw its lowest finish since November 2016 on Wednesday despite an overnight rally on Wall Street, as worries about the coronavirus outbreak eclipsed hopes that broad policy support would combat the economic fallout.

The Nikkei average shed 1.7% to 16,726.55, a 3-1/2-year closing low, having reversed earlier gains in choppy trade.

The Nikkei’s volatility index, a measure of investors’ volatility expectations based on option pricing and considered a gauge of investor fear, fell 0.9% to 56.12, remaining in the vicinity of Monday’s nine-year peak of 60.86.

Adding to wariness were U.S. stock futures which slid 3.7% in Asia, falling to their daily limit outside U.S. trade, a day after the S&P 500 climbed 6.0% and the Dow gained 5.2%.

Nikkei heavyweight SoftBank Group Corp plunged 10.9%, taking its market cap below that of domestic mobile phone subsidiary SoftBank Corp for the first time.

The broader Topix edged up 0.2% to 1,270.84, moving off a near four-year trough touched on Tuesday.

Hopes of the Bank of Japan (BOJ) buying Exchanged Traded Funds (ETFs) more aggressively lent support to the broad market, traders said.

The BOJ bought a record 120 billion yen ($1.12 billion) of Japanese stock ETFs on Tuesday, even though the Topix index rose in the morning.

BOJ Governor Haruhiko Kuroda told parliament on Wednesday that at current Nikkei levels, latent losses on the BOJ’s holdings of ETFs were likely around 2 trillion to 3 trillion yen ($19 billion to $28 billion).

Elsewhere, shares in Fujifilm Holdings Corp jumped by a daily limit of 15.4% after a Chinese official said the company’s Avigan anti-flu drug appeared to help coronavirus patients recover.

Performance gaps between individual shares were among the widest in recent years. In the Topix core 30, the best performer, Kao Corp, climbed 7.4%, while the worst, SoftBank Group, lost 10.9%.

$1 = 107.2800 yen Reporting by Tomo Uetake; Editing by Subhranshu Sahu and Christopher Cushing

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