Nikkei falls; turnover at 2010 high

Japan's Nikkei average fell 0.7 percent on Friday, as a higher-than-expected settlement for futures and options prices encouraged investors to take profits on a strong rally for the benchmark since the start of November. While sentiment for the Nikkei remains robust, analysts say technical signs that the market is overbought and the approach of the year-end was keeping a lid on potential near-term gains.
The closely watched up-down ratio for the Tokyo Stock Exchange's first section stood at 163 after Thursday's close, the highest level on record and well above the 120 level that is said to indicate an overheated market.
It is calculated by dividing the 25-day moving average of stocks that gained by 25-day moving average of those that fell. "On top of profit-taking and overheating of the market, some foreign investors are unloading positions and hedging ahead of the Christmas break," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
In active trade, the benchmark Nikkei closed the day down 73.93 points at 10,211.95 but it added 0.3 percent for the week. It hit a fresh seven-month high of 10,373.70 shortly after the open but profit-taking kicked in after futures and options contracts expiring in December were estimated at a stronger-than-expected 10,420.74. The settlement figure was later confirmed after the close of trade. The broader Topix index fell 0.4 percent to 888.22.
The settlement for futures and options as well as continued interest from foreign investors, who are now turning their attention to lagging sectors such as insurers, helped boost turnover to a high for 2010. Turnover on the Tokyo Stock Exchange's first section climbed to 2.55 trillion yen ($30.5 billion), while some 3.1 billion shares changed hands, the highest level since January 14.
Despite a climb of almost 12 percent since the start of November, the Nikkei is still down about 3.2 percent for the year to date. By contrast, Hong Kong's Hang Seng Index has gained 5.6 percent while the Standard and Poor's 500 index is up 10.6 percent. Market players said the Nikkei still has room to move higher. The Nikkei's 25-day moving average surpassed its 200-day moving average on Thursday, forming a "golden cross", suggesting the benchmark will maintain positive momentum longer-term.