Japan's Nikkei average fell 0.4 percent on Monday as exporters such as Canon Inc lost ground on a tumble on Wall Street and a stronger yen, while financial shares slid again on worries about earnings and a global credit shakeout. But bargain hunting kicked in for shipping stocks such as Nippon Yusen KK and others with profit prospects, helping trim some of the overall losses.
Toyota Motor Corp added 1.4 percent at 7,180 yen after strong earnings. The Nikkei is nearly 8 percent off this year's peak marked in February but Fimat strategist Kirby Daley said it was still too early to get back into the market. "We are still very much at the beginning stages, and it's far too early for a 'buying-on-dips' mentality in equities because the credit market will take at least a couple of months to sort itself out," Daley said.
"Going to cash is not a bad thing. I said a number of weeks ago cash is king, and it still is that way." The Nikkei shed 65.40 points to 16,914.46. The broader TOPIX index lost 0.3 percent to 1,668.04. Fujio Ando, senior managing director at Chibagin Asset Management, said he would keep to the sidelines to watch further developments in global equities markets.
"Many financial institutions have not disclosed how much they have exposed to the subprime mortgage market" and that indicates that the global financial markets could face more negative news, he said. "It's probably better off to take a summer holiday and do nothing," he said.
Market players added that exports to the United States are slowing, which may show up in Japanese gross domestic product data out next Monday. "It's the exports to the US that matter for Asia. And if they drop off, Asia will be hurt directly," said Daley of Fimat.
Daiwa Institute of Research senior strategist Junya Naruse said the market may get a chance to turn around in the autumn. "The market may be able to factor in all the bad news about the subprime market by September or October when US financial institutions announce their earnings and give us a chance to assess the magnitude of the problem," he said.
Trade slowed, with 2 billion shares changing hands, compared with last week's daily average volume of 2.3 billion. Declining shares outpaced advancers by 832 to 765. Canon, which generates about three-quarters of its sales overseas, gave up 2.3 percent to 6,370 yen. Canon has forecast an average dollar-yen exchange rate of 120 yen in the second half of the year and says each gain of one yen against the dollar will reduce its operating profit for July-December by 4.8 billion yen ($40.8 million).
Sony Corp skidded 3.1 percent to 5,920 yen. Banks extended losses on credit crunch worries. Mizuho Financial Group fell 2.5 percent to 702,000 yen, and the stock has slid 17 percent since last Tuesday's close. Mitsubishi UFJ Financial Group fell 2.5 percent to 1.16 million yen, making for an 8.7 percent tumble since Tuesday.
Japan Airlines Corp ended flat at 230 yen, after posting a narrower first-quarter loss helped by brisk demand on international routes and efforts to trim its payroll.
Fast Retailing Co Ltd retreated 2.5 percent to 6,550 yen after raising its bid for Barneys New York Inc to $950 million on Sunday, topping the sweetened offer that the Dubai government's Istithmar announced earlier in the day.
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