Tokyo equities expected to lose ground

Japanese shares might lose further ground in the coming week as international hedge funds adjust their positions before they report their earnings this month, analysts said on Friday. Stocks may come under pressure also due to a lack of fresh buying incentives, said Toshio Sumitani, strategist at Tokai Tokyo Research Centre.
"The Nikkei failed to recover the losses it saw this week. It only proved that the market is seeing a strong resistance at the 14,300 level," he said. "Instead of testing highs, the Nikkei is more likely to test lows in the coming week," he said.
Over the past week, the Nikkei-225 index lost 207.28 points or 1.46 percent to 14,012.20, as global jitters over the rising oil prices and inflation worries cooled investor sentiment. The broader Topix index of all shares in the first section of the Tokyo Stock Exchange fell 19.18 points or 1.37 percent to 1,376.69.
In the coming week, Sumitani predicted the Japanese headline index would move between 14,200 and 13,600 points. "Asian shares are generally falling, and it is doubtful that the Nikkei's rise will be sustained," Sumitani said.
"Hedge funds will be adjusting positions until they release their earnings at the end of May. Some players are also speculating that Japanese banks may announce more losses when they release April-June earnings in July," he said.
"Although it is difficult to predict the future direction of the market, the downside risks appear more significant than the upward possibilities," Sumitani said.
Soaring oil prices, which have struck record highs almost every day, have been depressing US consumer sentiment, weighing heavily on global share prices, said Tsuyoshi Nomabuchi, analyst at Daiwa Securities.
"The market will continue to be affected by the direction of oil prices," he said. "Particularly for the United States, further increase in the crude oil prices would seriously make matters worse."
He said one possible silver-lining was that if the US Federal Reserve stops cutting interest rates, energy prices may steady as the dollar stabilises. Nomura Securities also predicted the Nikkei would move between 14,200 and 13,500 points, adding that focus would be on US economic data, including housing statistics and revised first quarter gross domestic products figures.
In Japan, the consumer price index and industrial production data to be released in the coming week would possibly offer reasons for investors to sell Japanese shares, the brokerage said in a memo to clients.