Japan's Nikkei average lost 1.6 percent on Tuesday, succumbing to profit-taking after hitting a six-month closing high the previous day, with drugmaker Daiichi Sankyo sliding 9.3 percent after a large annual net loss. Bank shares such as Mitsubishi UFJ Financial Group retraced some of their earlier sharp gains fuelled by optimism about the US banking system after US financials slid the previous day on news of several banks' share offerings.
"Investors are becoming a little nervous after several days of steady gains. Their appetite for risk was dulled slightly after US banks did an about-face yesterday and fell as some gear up to raise more capital," said Shoji Yoshigoe, a senior investment strategist at Mitsubishi UFJ Securities. "The selling in the market is still mostly limited to profit-taking," Yoshigoe said.
The benchmark Nikkei shed 153.37 points to 9,298.61. It rose 0.2 percent on Monday to its highest close since November 5. Tuesday's fall comes after the Nikkei rose more than 11 percent during five consecutive days of gains. The broader Topix retreated 1.7 percent to 885.43.
Closely watched corporate earnings releases continued on Tuesday, with Daiichi Sankyo losing 9.3 percent to 1,653 yen after booking a large annual net loss on its stake in India's generic drugmaker Ranbaxy Laboratories. It forecast a net profit of 40 billion yen ($410 million) for this financial year, short of a consensus forecast of 74.2 billion yen in a poll of 14 analysts by Thomson Reuters.
Daiichi Sankyo was one of the top drags on the Nikkei 225 on Tuesday. Dentsu Inc, Japan's biggest advertising agency, fell 7.5 percent to 1,803 yen after reporting a fourth-quarter loss of 24.6 billion yen and forecasting a weaker recovery than expected this year.
Japan's banking subindex fell 4.6 percent, after rising nearly 20 percent over the past three trading days on growing investor confidence about the banking system in the wake of US government stress tests. Top lender Mitsubishi UFJ slid 5 percent to 640 yen and Mizuho Financial Group shed 6.2 percent to 244 yen.
Exporters such as automakers fell on a stronger yen, which curbs their profits when funds are repatriated. The dollar dipped 0.3 percent to 97.24 yen after moving above 98 yen the previous day. "Whether the market can keep gaining likely depends on two main factors. The first is more evidence of an economic recovery," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"The second is the yen. The currency has so far been held below 100 yen (against the dollar) but exporters will be supported if it can go above that level," Osakabe said. Toyota Motor Corp, the world's biggest automaker, slipped 1.3 percent to 3,740 yen, while Honda Motor Co declined 1.4 percent to 2,860 yen. Suzuki Motor fell 2 percent to 1,985 yen, after eking out gains earlier.
The automaker forecast an 87 percent drop in profit this year citing slumping global demand and a stronger yen, though it escaped a loss in January-March, the final quarter of last financial year, thanks to growth in its main Indian market. Shares of Sanyo Electric jumped 6.9 percent to 187 yen following a two-notch upgrade by Credit Suisse to "outperform" from "underperform".
Credit Suisse said it was recommending Sanyo as a core green energy stock and that Sanyo would benefit from its ties with Panasonic as it would receive help in cutting costs and promoting its lithium-ion batteries. Trade slowed on the Tokyo exchange's first section, with 2.5 billion shares changing hands compared with last week's daily average of 3 billion. Declining stocks outnumbered advancing ones by more than 2 to 1.