Japan's Nikkei average hit a 15-month closing low below 9,000 points on Tuesday, with hedge funds and foreigners seen selling amid mounting concern about the authorities' inaction on a strong yen, which threatens a fragile economic recovery.
Market players said the close below the keenly-watched 9,000 level would likely feed downward momentum, with few technical targets to break the benchmark's fall. Market disappointment remained keen after Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa only spoke over the phone on Monday, foregoing a long-expected meeting, with no concrete action to counter yen strength that could hobble Japan's export sector and hit the economy.
The benchmark Nikkei shed 1.3 percent or 121.55 points to 8,995.14, its lowest close since May 2009, after earlier falling as far as 8,983.52. The broader Topix lost 0.9 percent to 817.73. Market players said foreign investors and hedge funds were sellers, but that much of the day's slide was powered by individual investors losing heart and dumping shares.
A few said there appeared to be some light buying by pension funds at the lows and that some other investors could be bargain-hunting, but they added that most players were reluctant to take on the necessary risk. So far this year, the Nikkei has been one of the world's worst-performing markets, which analysts largely blame on the yen's advance and its impact on exporters.
The MSCI Japan index is down roughly 10.4 percent so far this year, while the MSCI All-Country World Index has shed 5.9 percent in the same period. The Nikkei's next target stands at 8,697, a 61.8 percent retracement of the rally between its March 2009 low and April 2010 high, but few significant targets are seen below that.
But by some technical measures, the Nikkei is starting to look oversold and perhaps due for a bit of a rebound. Its relative strength index (RSI) fell to 36, with 30 and under considered oversold, while its slow stochastic fell into oversold territory. The Nikkei also fell near its lower Bollinger Band.
Among the broad selling, exporters in particular lost ground, with Sony Corp falling 3.7 percent to 2,406 yen, Canon Inc sliding 0.9 percent to 3,520 yen and Tokyo Electron shedding 3.8 percent to 4,100 yen. Nomura Real Estate Holdings fell 6.3 percent to 1,119 yen after Credit Suisse cut its rating on the company to "underperform" from "neutral", citing the potential risk of valuation losses and uncertainty about the level of those losses.
Eisai Co gained 1.5 percent to 3,055 yen and Daiichi Sankyo Co climbed 2.4 percent to 1,678 yen. Cosmetics firm Shiseido Co added 0.4 percent to 1,875 yen. Trade was thin on the Tokyo exchange's first section, with 1.5 billion shares changing hands, a day after booking volume of 1.28 billion yen, a two-week low. Declining stocks outnumbered advancing ones by more than 2 to 1.
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