The Nikkei slipped 0.56 percent on Monday to close at its lowest in six weeks as investors, wary ahead of the release of gross domestic product data on Tuesday, sold Fast Retailing Co Ltd and other firms sensitive to domestic demand.
Nikon Corp advanced as its solid earnings led Mizuho Securities to lift its target price for the company while Fanuc Ltd and other machinery stocks extended their losses in the wake of Japan's September machinery orders numbers, which came in below expectations on Friday.
"Investors are doing last-minute selling to square their positions" ahead of the GDP, said Masayoshi Okamoto, head of dealing at Jujiya Securities. "They are unloading stocks or sectors that are likely to be affected by the data." The Nikkei dropped 89.94 points to 16,022.49, its lowest close since September 27. The broader TOPIX was down 0.80 percent at 1,568.76. GDP is expected to have grown just 0.2 percent in price-adjusted terms in the July-September period from the previous quarter because of weak consumption, according to a Reuters poll.
Okamoto said while the market has pretty much factored in weak numbers for the GDP, the upside potential might be also limited even if the numbers come in better than expected. "The sentiment has trended bearish, and even if the GDP numbers are good, the market may not appreciate that," he said, adding that recent weak economic indicators have darkened the market view of the economy.
Still, some investors including Kazuhide Hayashi, deputy general manager Norinchukin Zenkyoren Asset Management, are keeping their hopes up. "The market seems to be too pessimistic," he said. "Winter bonuses will be increased and the labour market is tight. Hopefully, wages will rise too in the next fiscal year." Ryoobi Mishap, chief investment officer at Deutsche Securities, was also positive on the market outlook.
"Global investors have substantially increased their portfolio weighting to Japanese equities, but the poor relative performance has prompted a growing number to scale back their exposure," he said in a note on Monday. "This suggests to us that the situation could reverse once this selling phase ends."
FAST RETAILING DOWN Fast Retailing, operator of the unique chain of casual-clothing stores, declined 2.3 percent to 9,990 yen, becoming the biggest contributor to the Nikkei's decline.
Selling also mounted as Credit Suisse on Friday cut its rating on the stock to "neutral" from "outperform" and lowered its target price by 1,300 yen to 11,200 yen, saying the stock no longer appeared to be undervalued.
Fanuc, a maker of industrial robots, fell 0.9 percent to 10,360 yen, adding to a decline of 0.4 percent on Friday when it slipped after the worse-than-expected machinery orders data. A sharp drop in US crude oil futures pushed energy stocks lower. Oil and gas developer INPEX Holdings Inc fell 2.4 percent to 956,000 yen and its peer AOC Holdings Inc lost 3.9 percent to 1,990 yen.
Nippon Telegraph and Telephone Corp, Japan's largest telecom operator, shed 1 percent to 571,000 yen after posting a 9.4 percent fall in first-half operating profit on Friday on lower voice call revenues and higher costs at its mobile unit.
After the market closed, Hitachi Ltd said it has agreed with General Electric Co to expand their global alliance in the nuclear power business, aiming to strengthen their position in a growing market.
AOZORA BANK IPO EYED Tsuyoshi Nomaguchi, a strategist at Daiwa Securities Co LTD's investment advisory department, said the listing on Tuesday of Azure Bank, an offering of $3.2 billion and Japan's biggest IPO in eight years, is putting the market under pressure.
Aozora, a Japanese lender majority-owned by US private equity firm Cerebrums, will list on the Tokyo Stock Exchange. Bank shares lost ground on expectations that fund managers at index-tracking funds may sell their bank share holdings in order to include Aozora Bank shares in their portfolios. Japan's second largest banking group Mizuho Financial Group Inc fell 2.1 percent to 835,000 yen and Shinnies Bank Ltd dropped 2.6 percent to 627 yen.
Trade activity hit it's lowest in four sessions, with 1.64 billion shares changing hands on the Tokyo exchange's first section. Declining shares beat advancers by a ratio of more than four to one.
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