Japan's Nikkei average edged up 0.2 percent on Tuesday but gains were limited by concerns over risk factors such as the impact of China's efforts to curb bank lending and Greece's fiscal woes. Toyota Motor Corp edged higher after having been battered over the past few weeks due to the carmakers' recalls of millions of vehicles.
But trading volume on the Tokyo exchange's first section dwindled to the lightest so far this year, and market players fretted that the Nikkei's pullback since mid-January had yet to run its course. "Looking at the type of shares people are buying, it seems like the risks are tilted toward the downside rather that the upside," said Kiyoshi Noda, chief fund manager at MU Investments.
Noda said there were signs that investors may be shifting funds into high-dividend shares in defensive sectors such as pharmaceuticals and telecommunications and away from some China-linked shares such as machinery firms. Eisai and NTT DoCoMo were examples of such defensive stocks, while China-related stocks included firms like Hitachi Construction Machinery, Noda said.
"But it is not as if the economy looks poised to deteriorate rapidly, so overall I think the market will trade in a range," he said, adding that the Nikkei may hover in a range around 10,000 for a while. The benchmark Nikkei average rose 20.95 points to 10,034.25. The broader Topix index gained 0.2 percent to 885.17.
Toyota Motor rose 0.8 percent to 3,380 yen, but was still 20 percent below a peak hit in January. Trade was the lightest this year, with some 1.4 billion shares changing hands on the Tokyo exchange's first section, as several Asian markets including China and Singapore were closed for the Lunar New Year holiday.
Advancing shares outnumbered declining ones 756 to 714. After the market close, Mitsubishi Chemical said it would launch a tender offer to buy Mitsubishi Rayon for 217.4 billion yen ($2.4 billion). Mitsubishi Chemical said it would offer 380 yen per Mitsubishi Rayon share between February 17 and March 19.
Before the announcement, Mitsubishi Chemical rose 0.3 percent to 375 yen and Mitsubishi Rayon added 0.3 percent to 373 yen. Sumitomo Corp lost 4.4 percent to 967 yen after it said it would launch a 122.1 billion yen ($1.4 billion) tender offer to raise its stake in cable TV company Jupiter Telecom to 40 percent, countering a rival bid by telecoms firm KDDI.
The move could be an attempt to oppose a similar bid by KDDI to become the company's top shareholder, one analyst said. "But there are some real doubts in the market about how good a strategic move this is for Sumitomo, given the high premium they say they'll pay. The strategy is clearer for KDDI," said Kenichi Hirano, operating officer at Tachibana Securities.
KDDI inched up 0.1 percent to 494,000 yen, and Jupiter Telecom jumped 16.7 percent to 105,000 yen. Shares of consumer lenders fell broadly after Citigroup Global Markets Japan downgraded the sector on Monday.
"Initially we believed the Project Team on Moneylending Systems was likely to favour reform, but the pendulum has now swung back toward a harder landing solution," Citigroup Global Markets Japan analyst Takehiro Tsuda said in a research note. "We think it increasingly likely the revised Moneylending Law will go into effect without changes from June," Tsuda added.
The latest version of Japan's moneylending law, which goes into full effect in June, will introduce measures such as capping the amount of unsecured debt an individual can hold at one-third of annual income. Promise Co Ltd slid 8.6 percent to 651 yen, Takefuji Corp dropped 5.6 percent to 372 yen and Acom Co Ltd fell 8.2 percent to 1,256 yen. Aiful Corp, which won backing in December from creditors to reschedule its debt payments, dropped 4.6 percent to 126 yen.