Tokyo shares likely to bottom out after touching 28-month low

Japanese shares are expected to bottom out after touching a 28-month low during a volatile week with the market looking to US data and monetary decisions, dealers said on Friday.
After a major sell-off on Monday and Tuesday, the Japanese market rebounded in line with a global recovery after the US government and central bank took emergency measures to shore up the troubled economy. "The worst period appears to be ending for now. The mood of panic has been fading," said Toshikazu Horiuchi, an analyst at Cosmo Securities.
He said that the market had the potential to rise as players felt "the recent decline was too sharp."
"We can say shares are still underpriced, considering the real performance of Japanese companies," he said. "Investors' focus is now shifting to what has and will happen to companies as major firms are beginning to release their third-quarter earnings."
A slew of Japanese companies release earnings next week including electronic giants Matsushita, Sony and Toshiba, auto-makers Honda and Nissan and telecom leader NTT DoCoMo.
The headline Nikkei-225 index lost 232.13 points or 1.68 percent to 13,629.16 during the week, but the broader Topix of all first-section shares rose 3.27 points or 0.24 percent to 1,344.77.
On Tuesday, the Nikkei-225 index lost 752.89 points or 5.65 percent at 12,573.05, closing below the symbolic 13,000-point level for the first time since September 2005.
Share prices, however, recovered towards the end of the week after the Federal Reserve made a surprise steep rate cut of three-quarters of a percentage point and US political leaders moved quickly on a 150-billion-dollar stimulus package. Eyes were again on the Federal Reserve which will hold a regular meeting for two days starting on Tuesday, said Hirokazu Fujiki, strategist at Okasan Securities. "A cut in interest rates is already factored in. The question is by how much," Fujiki said.
The market will also look to key US indicators, including the jobless data to be released on Wednesday, dealers said. Analysts, however, warned it is still too early to be optimistic about the prospects for global stocks and the US economy.
"Fundamentally, nothing has been sorted out," said Hirokazu Fujiki, strategist at Okasan Securities. "It wouldn't be a surprise if there is another wave of selling sometime in the near future." Analysts also warned the yen's recent strength against the dollar would pressure earnings of Japanese exporters.