Japanese technology shares may suffer on Monday after Sanyo slashed its profit outlook, as the wider market takes a rest from recent rises and domestic investors stay sidelined ahead of the financial year-end.
Japanese stocks, which hit a 21-month high on Thursday, are expected to trade in a narrow range as buying by foreign investors may slow and domestic investors finalise their books ahead of the end of the financial year on March 31.
"There are growing concerns that domestic stocks may have been overbought in recent sessions, so some recent high flyers could continue to suffer from profit-taking," said Yoshihisa Okamoto, senior vice president at Fuji Investment Management.
"Stocks are likely to revolve around their current levels this week," he added.
After the market close on Friday Sanyo Electric Co Ltd slashed its full-year net profit estimate 88 percent on Friday, hurt by poor sales of home appliances and a 15 billion yen ($140 million) investment loss.
The benchmark Nikkei average closed at 11,418.51 on Friday, after hitting an intraday high of 11,647.71 on Thursday, its strongest since June 2002.
The TOPIX of all first-section issues, which touched a 2-1/2 year high during the week, finished at 1,138.09.
Analysts said investors were not yet ready to push the Nikkei higher but were bullish about Japan's economic recovery, keeping the benchmark from falling below the psychologically important level of 11,000.
They expect the Nikkei, up nearly seven percent for the year so far, to trade between 11,200 and 11,800 this week.
The retail, property, building and bank sectors, which have enjoyed gains of as much as 20 percent in the past month, are likely to become the subject of profit-taking this week.
Traders said the profit warning from Sanyo, the world's biggest maker of batteries for mobile phones, may discourage investors from buying high-techs, which are already under pressure from the recent rapid appreciation of the yen against the dollar. Sanyo shares closed 1.3 percent lower on Friday ahead of the announcement.
"This has made it difficult for investors to buy digital home electronics products makers," said Koichi Seki, equity manager, sales department at Chuo Securities.
Those likely to come under pressure include Sharp Corp, Japan's largest maker of flat-screen televisions, and another leading digital products maker, Matsushita Electric Industrial Co.
The technology-laced US Nasdaq Composite index fell 1.12 percent on Friday.
Seki said attention was on 2003 land-price data to be issued by the Ministry of Land, Infrastructure and Transport on Monday. Japanese land prices have been depressed since the bursting of an asset price bubble over a decade ago.
Masatoshi Kikuchi, chief equity strategist at Merrill Lynch, said in a report released on Friday he had lowered his rating on the construction and real estate sectors to neutral from overweight as their shares seem to be overbought and are likely to be the target for profit-taking.
Investors aggressively chased Japan's largest property developer Mitsui Fudosan Co and builder Kumagai Gumi Co Ltd and their peers on expectations that Monday's report would show a pick-up in land prices. Shares in both firms are up more than 20 percent so far this year.
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